The cannabis industry is a rapidly growing sector that has been gaining popularity in recent years. As more and more states legalize the use of cannabis for medical and recreational purposes, the industry is expected to grow even further. While this presents significant opportunities for businesses within the industry, it also brings its fair share of challenges, including the ability to attract and retain talented employees.
One way that businesses within the cannabis industry can address this challenge is by taking advantage of the Employee Retention Credit (ERC), a tax credit designed to incentivize businesses to keep their employees on payroll during the COVID-19 pandemic. Here’s what you need to know about the ERC and how it can benefit your cannabis business.
What is the Employee Retention Credit?
The Employee Retention Credit is a tax credit that was introduced as part of the CARES Act in 2020. The credit is designed to help businesses keep their employees on payroll during the COVID-19 pandemic by offering a refundable tax credit per employee per quarter. To be eligible for the credit, businesses must have experienced a significant decline in revenue due to the pandemic, and they must have either fully or partially suspended operations due to government orders, or experienced a significant decline in gross receipts.
How can the ERC benefit businesses in the cannabis industry?
The cannabis industry has faced numerous challenges in recent years, including a lack of access to traditional banking services and a constantly evolving regulatory environment. As a result, businesses in the industry have struggled to attract and retain talented employees. The ERC can help address this challenge by providing businesses with a financial incentive to keep their employees on payroll, even during times of economic uncertainty.
In addition, the cannabis industry has been deemed an essential business in many states, meaning that businesses within the industry may be eligible for the ERC even if they did not fully suspend operations due to government orders. This is significant because it means that businesses in the industry can still benefit from the credit even if they were able to continue operating during the pandemic.
What should businesses in the cannabis industry do to take advantage of the ERC?
To take advantage of the Employee Retention Credit, businesses within the cannabis industry should work with their tax advisors to determine if they are eligible for the credit and how much they can claim. They should also ensure that they have the necessary documentation to support their claim, including evidence of a significant decline in revenue or gross receipts, and documentation of any government orders that required them to suspend operations.
In addition, businesses should be aware that the ERC has been extended through December 31, 2021, meaning that they still have time to claim the credit for wages paid during this time period. However, it’s important to act quickly, as the deadline for claiming the credit is the filing deadline for the employer’s federal income tax return, including extensions.
The cannabis industry presents significant opportunities for businesses, but also brings its fair share of challenges, including the ability to attract and retain talented employees. By taking advantage of the Employee Retention Credit, businesses within the industry can provide a financial incentive for their employees to stay on payroll during times of economic uncertainty, helping to ensure the long-term success of their businesses.
