It’s that time of year when thoughts turn to taxes. With tax reform, it’s been an especially busy and complicated effort by CPA’s to figure out just how tax reform will affect businesses and individuals. The cannabis industry luckily doesn’t have to worry about tax reform because the reform didn’t reform anything for the industry.
Jim Marty, the Chief Executive Officer at Bridge West helps his clients work through bookkeeping and taxation issues that are unique to the cannabis industry. Marty said his company has clients in every state where marijuana is legal. Of course, the biggest tax problem for cannabis companies is the inability to deduct business expenses known as 280(e). Marty believes that 280E will get addressed by Congress at some point. It’s been introduced in various bills, but none have come to a vote.
Bridge West went into cannabis accounting in the early days of Colorado legalization as Marty’s traditional clients began to shift over to cannabis. They needed an accountant and in those days many professionals were not willing to take a risk and work with cannabis businesses. Marty took off to California on a research mission and came back determined to take on this business. Then, because he was willing to work with cannabis clients when others wouldn’t, that side of his business soon outpaced the traditional clients. Bridge West now counts over 200 cannabis companies as clients.
The growth of the business led Bridge West to become a full-service CPA firm. In addition to helping clients with tax issues, it also assists in creating financial statements, good reporting processes and strong business models.
With the merger of Boeckermann Grafstrom Mayer or BGM in 2017, Chief Operating Officer Cory Parnell came on board and the company has gotten even stronger helping clients figure out key organizational structure. Parnell makes the analogy to auto dealerships. “One dealership has so many different businesses under one roof. There’s the new car seller, used car seller, service dept, parts dept and so on. Cannabis structures are looking to be very similar.” One organization may have a retail operation, an agricultural operation, a processing operation and each of these businesses has its own specific needs.
Parnell also noted that the market has evolved to more sophisticated players. “Having done this process numerous times, we can advise businesses on the best organizational structure from a strategic perspective,” said Marty.
One trend the two are seeing is that more U.S. companies are asking about going public in Canada. “We help our clients go public on the Canadian exchanges. The valuations are better there than here in the U.S. at the OTC Marketplace,” said Marty. “It gives them access to more capital.” He added that the company was doing a lot of reverse merger work.
By taking the chance in the early days and servicing a group of clients that others avoided, Bridge West has earned its stripes. The company’s years in the cannabis industry has given it an edge that others don’t have. Plus, the stigma around cannabis businesses remains and Bridge West can continue to gain market share as the product remains federally illegal.
“I think Congress is actually ready to change that,” said Marty. His feeling is that the politicians are getting closer to finally moving towards legalization. In the meantime, Bridge West is happy to serve the community.