280E Considerations for New Mexico Retailers
As a reseller, a dispensary's federal cost of goods sold is limited to what it paid for product plus the narrow set of acquisition costs the reseller inventory rules allow — invoice price, inbound freight, and little else. Everything that makes a storefront in Albuquerque or Santa Fe function day to day — payroll, rent, security, marketing, delivery, POS software, management salaries — is disallowed under Section 280E at the federal level, full stop.
There's no creative recharacterization that survives scrutiny here. The workable response is precision: capture landed cost accurately the moment product is received, keep inventory records that hold up to review, and if a genuinely separate non-plant-touching line of business exists, give it real economic substance rather than treating it as a label.
Because the federal base is gross profit rather than net income, margin management is tax management. A promotion that trades four points of gross margin for volume costs the operator that margin plus the tax computed on it — there's no deduction anywhere in the return to offset the loss.
- Inventoriable: invoice cost, inbound freight, permitted acquisition costs
- Disallowed federally: payroll, rent, security, marketing, delivery, software
- New Mexico's Gross Receipts Tax and cannabis excise tax run on separate calendars from the federal return
Cost Accounting, Inventory and BioTrack in a Store
Landed cost should be recorded the moment a BioTrack transfer is accepted, not reconstructed from vendor invoices weeks later. Every SKU needs a unit cost that supports both the federal tax position and the category-level margin reporting a retail buyer uses to plan shelf space.
Inventory integrity depends on a monthly three-way reconciliation between BioTrack package quantities, the POS subledger and the general ledger. Variances get classified — receiving error, an unreversed voided sale, sampling, destruction, theft — instead of plugged as a lump adjustment. Unexplained variance is both a licensing exposure with the RLD Cannabis Control Division and a defect in the number the federal return relies on.
Product aging matters too. Flower and edibles lose shelf appeal and eventually get destroyed, and stock written off at the back of the store represents margin the federal return will never return through a deduction. Days-on-hand by SKU belongs in every monthly package.
Tax Planning and Recommended Services
Planning for a New Mexico retailer centers on three things: funding federal estimates against a gross-profit tax base rather than book income, keeping Gross Receipts Tax and cannabis excise tax accrued and remitted correctly — including the exemption for sales to enrolled medical patients — and holding discount discipline that protects the margin the tax is actually computed on. Border-market stores near Sunland Park and Las Cruces also need pricing models that account for cross-border demand from Texas without slipping on margin.
We build the accounting system first and let the tax return follow it. If you operate a licensed New Mexico dispensary, a diagnostic review will quantify what your current treatment is costing you before any engagement begins.
