NMCannabis CPA New Mexico

Tax

280E Tax Planning for New Mexico Cannabis Businesses

Year-round cannabis tax planning built on reliable bookkeeping, supported inventory accounting, COGS workpapers and defensible documentation. Where Section 280E applies, the positions a New Mexico dispensary, producer or manufacturer can support on a return are decided by the records built during the year — bookkeeping, then inventory, then COGS support, then tax workpapers, then 280E analysis where applicable.

What 280E Tax Planning Covers

280E tax planning is the process of coordinating accounting, inventory, cost of goods sold support, documentation and tax workpapers so a cannabis business can apply current federal tax rules appropriately where Section 280E applies. It is engagement work performed across the year rather than an adjustment made at filing.

For businesses subject to Section 280E, the practical constraint is rarely the rule itself — it is whether the records can support the treatment applied. Our scope starts with the ledger and the inventory records, then builds the cost of goods sold support and the workpapers that connect them to the return.

  • Monthly accounting reviewed with tax treatment in mind, not only reporting
  • Inventory accounting and valuation support tied to the general ledger
  • Documented cost treatment and written methodology in the permanent file
  • Tax workpapers structured so every figure traces back to a transaction
  • Estimated tax coordination modeled against current-year results and liquidity

Supported COGS, Not Relabeled Expense

Where Section 280E applies, cost recovered through cost of goods sold is determined by inventory accounting rather than by how an operating expense is labeled. Which costs are properly absorbed into inventory is fact-specific and depends on the taxpayer's activities, its accounting methods and current federal tax treatment.

We build supported COGS: documented cost treatment, applied consistently, traceable to purchase and production records, and explained in a workpaper a reviewer can follow. Where treatment is genuinely uncertain, we document the uncertainty rather than presenting it as settled.

Retail License Facts

For a retail license in Albuquerque, Santa Fe or anywhere else in the state, product cost is built from invoice cost and the acquisition costs the applicable rules permit, supported by purchase, receiving and inventory records rather than by an after-the-fact percentage.

Producer and Manufacturer Facts

Producer, microbusiness, manufacturing and vertically integrated licensees accumulate production cost through inputs, labor and facility activity. Whether a particular cost is properly absorbed into inventory for federal tax purposes is fact-specific, so the method is written down, applied consistently and supported by production records.

Fractional CFO strategy session reviewing cannabis financial projections in a glass boardroom above downtown Albuquerque at dusk

Planning Continuously, Not Scrambling in April

The support behind a 280E position is created during the year, when documentation still exists and variances can still be explained. We review classification and inventory activity each period, revisit positions quarterly, and coordinate estimated payments against actual results instead of a stale prior-year figure.

The two most expensive patterns we see across New Mexico operators are underfunding federal estimated payments while state excise and gross receipts obligations pull cash the other direction, and taking cost positions with no paper trail behind them. Both are far cheaper to prevent than to remediate.

  • Quarterly effective-rate and cash-tax review
  • Reasonable compensation and distribution review
  • Entity analysis where a genuinely separate trade or business exists
  • Written methodology memos kept in the permanent tax file

Substantiation and Examination Readiness

Cannabis returns attract attention, and the taxpayer generally carries the burden of substantiating inventory cost. Preparing for that possibility is a documentation discipline, not a promise about outcomes — no accountant can guarantee how an examination resolves.

We keep a standing support file year-round: inventory valuation reconciled to seed-to-sale package activity, labor support backed by function coding and time records, fixed-asset schedules, intercompany agreements, and memoranda explaining each significant position. When a notice arrives, the file already exists.

Cannabis accountants reviewing financial reports and margin analytics on screen in a dark executive office overlooking the Sandia Mountains

How New Mexico's Own Tax Rules Interact

New Mexico's income tax does not follow the federal Section 280E disallowance for licensed cannabis activity, so expenses restricted federally may still be deductible on the state return. That produces a book-to-tax gap and a state computation that can differ materially from the federal one.

That divergence has planning value, and it also creates a documentation obligation: two computations built from one set of records means the records have to support both. Educational background on the state layer, including excise and gross receipts treatment, is in the New Mexico Cannabis Tax Guide.

What 280E Costs a Real New Mexico Operator

Consider an Albuquerque storefront retailer with $6,000,000 of gross receipts, a 48 percent product margin and $2,300,000 of operating expenses. Gross profit is roughly $2,880,000 and book pre-tax income is roughly $580,000. Federally, almost none of the $2,300,000 is deductible, so the tax base is gross profit rather than income. The result is a federal liability calculated on nearly five times the economic profit, and an effective rate that would be absurd in any other industry.

Now move the same operator to a producer license. A mixed-light cultivator near Las Cruces with the same revenue capitalizes cultivation payroll, nutrients, power, water, grow-room depreciation and quality assurance into inventory. The disallowed pool shrinks to sales, marketing and general administration, and the effective rate falls dramatically. Nothing about the underlying economics changed — only the license type and the quality of the cost accounting behind it.

This is why we start every 280E engagement with a modeled comparison of current-state and properly-costed federal liability. The gap is usually large enough to fund the entire accounting function several times over, and it's quantified before any work is done.

Case Law That Shapes Every Position We Take

CHAMP established that a taxpayer can operate a separate, non-trafficking trade or business alongside a cannabis business and deduct the expenses of that separate business. It also set the standard: genuine separateness, supported by real allocation of employee time, space and expense. Olive narrowed the practical scope by rejecting a claimed second business that was in substance a way to give away services to cannabis customers.

Patients Mutual, the Harborside case, closed the door on retailers dressing selling expenses as inventory cost and confirmed that a reseller's COGS is governed by the reseller rules. Subsequent decisions reinforced that 263A doesn't expand a trafficker's inventoriable costs beyond what 471 already permits for that taxpayer type.

The through-line is that structure and documentation win cases, and creative recharacterization loses them. We take positions we can trace to a specific inventory rule, and we write down why, at the time — not in response to an information document request.

  • CHAMP: separate trade or business is possible, with real economic separation
  • Olive: form without substance fails
  • Patients Mutual: resellers cannot inventory selling costs
  • Consistency across years matters as much as the position itself

The system

280E Tax Planning for New Mexico Cannabis Businesses

280E tax planning is the year-round process of coordinating bookkeeping, inventory accounting, cost of goods sold support, documentation and tax workpapers so a cannabis business can apply current federal tax rules appropriately where Section 280E applies. It is accounting work first and filing work second: the positions a return can support are decided by the records built during the year.

  1. Business activity
  2. Bookkeeping
  3. Inventory
  4. COGS support
  5. Tax workpapers
  6. 280E analysis where applicable
  7. Tax preparation

Every element of that chain is a dependency for the next one. Where the ledger is unreconciled, inventory values cannot be trusted; where inventory values cannot be trusted, cost of goods sold has no support; and where cost of goods sold has no support, the tax workpapers rest on estimates rather than records. Our work for New Mexico dispensaries, producers, manufacturers and vertically integrated licensees starts at the bottom of that chain rather than at the top.

ACCOUNTING CLASSIFICATION ≠ AUTOMATIC FEDERAL TAX TREATMENT

For background reading rather than service scope, see the educational 280E explained guide and the New Mexico Cannabis Tax Guide. This page covers the engagement: the planning, accounting support and documentation work performed for clients.

Definition

What Is Section 280E?

Section 280E is a federal tax provision that can limit deductions and credits for a trade or business found to be trafficking in a controlled substance prohibited by federal law. Where it applies, ordinary operating-expense deductibility may be restricted, so accounting records, inventory accounting and cost of goods sold support become especially important — tax treatment may differ from how a cost is classified for financial reporting.

Federal cannabis scheduling and the reach of Section 280E have been the subject of ongoing administrative and legislative activity. Depending on current federal tax treatment, the analysis for a given year, a given entity and a given cost may differ. We write positions in a way that states the facts, the records supporting them and the treatment applied, so that a change in federal law can be applied prospectively without discarding the underlying accounting.

What does not change with the law is the recordkeeping. Whether a cost is ultimately restricted, capitalized into inventory or deducted, the taxpayer is expected to be able to show what the cost was, what it related to, when it was incurred and how it moved through the books. That is the durable part of 280E planning, and it is the part most cannabis businesses are missing when they first call.

Distinction

280E Tax Planning vs Tax Preparation

280E tax planning is year-round analysis of books, inventory, COGS support, documentation and workpaper structure, including scenario analysis before decisions are made. Tax preparation is the year-end work of taking a trial balance and workpapers and producing a filed return. Planning determines what the return can support; preparation reports it.

Dimension280E tax planningTax preparation
TimingContinuous through the yearAfter the year closes
InputsLedger, inventory records, payroll, documentationTrial balance and completed workpapers
OutputSupported positions, workpaper structure, scenariosFiled federal and state returns
Where it livesThis pageCannabis tax preparation
  1. Year-round accounting
  2. 280E analysis
  3. Year-end tax workpapers
  4. Return preparation

Foundation

Why Bookkeeping Matters for 280E

Bookkeeping supports 280E by producing a reconciled ledger in which each transaction is classified consistently and traceable to source documentation. Without reconciled bank, cash, payroll and inventory accounts, tax workpapers cannot be tied back to the records they claim to summarize.

  1. Bookkeeping
  2. Reconciliation
  3. Reliable ledger
  4. Tax workpapers
  • Transaction classification applied consistently, not renamed at year end
  • Supporting documentation attached to or referenced by each material entry
  • Bank reconciliations completed monthly for every account
  • Cash counts, deposits and variances documented rather than plugged
  • Payroll recorded by function and location, agreeing to provider reports
  • Inventory accounts reconciled to inventory records, not to expectations
  • Balance-sheet accounts reviewed for stale or unsupported balances
  • A month-end close that finishes before the next month's data arrives

BOOKKEEPING CLASSIFICATION ≠ AUTOMATIC TAX TREATMENT

A cost coded to an inventory account in the general ledger is not, for that reason alone, an inventoriable cost for federal tax purposes; a cost coded to an operating expense account is not automatically nondeductible either. Classification creates the record. Treatment is a separate, fact-specific analysis performed against the record. Recurring bookkeeping is scoped under cannabis bookkeeping.

Core

Inventory & 280E

Inventory affects 280E because cost of goods sold is derived from inventory activity. Purchases, receiving, transfers, adjustments, physical counts and ending inventory valuation determine what cost has been absorbed into product and what cost remains on the balance sheet, which is what tax workpapers ultimately have to support.

  1. Operational inventory
  2. Physical inventory
  3. Accounting inventory
  4. General ledger
  5. Tax workpapers

INVENTORY QUANTITY ≠ FINANCIAL INVENTORY VALUE

A seed-to-sale platform is a compliance system that tracks packages, weights, transfers and dispositions. It is authoritative for quantity and movement, and it is not an accounting system: it does not carry your vendor invoice terms, freight, adjustments, write-downs or capitalized production cost in a form a tax workpaper can rely on. Treating a platform quantity report as if it were an inventory valuation is one of the most common failures we correct.

The work in an engagement runs in both directions. Quantities are reconciled between the operational system, the physical count and the accounting records, and any variance is investigated and documented rather than absorbed silently into cost of sales. Values are then built from purchase and production records, applied consistently period over period, and rolled forward so that beginning inventory, additions, cost of sales and ending inventory articulate. Deep inventory work is scoped under seed-to-sale and inventory reconciliation, with background in the New Mexico Inventory Accounting Guide.

  • Purchase and receiving records that establish landed cost
  • Transfers between locations or license types recorded on both sides
  • Adjustments, waste and destruction events documented at the package level
  • Periodic physical counts with a written count procedure
  • A documented inventory valuation approach applied consistently
  • An inventory rollforward that ties to the general ledger every period

Core

COGS & 280E

Cost of goods sold affects 280E because, where Section 280E restricts ordinary deductions, the cost recovered through COGS is determined by inventory accounting rather than by operating-expense classification. COGS is computed from inventory activity and must be supported by records, not derived from a percentage.

BEGINNING INVENTORY + APPLICABLE INVENTORY COST ACTIVITY − ENDING INVENTORY = COGS

Cost of goods sold and deductible operating expenses are not the same thing, and the boundary between them is fact-specific. Which costs are properly absorbed into inventory depends on the taxpayer's activities, its accounting methods and the applicable federal rules for its facts. Our role is to produce supported COGS: cost treatment that is documented, applied consistently, traceable to source records and explained in a workpaper a reviewer can follow.

We do not approach this as an exercise in relabeling. Reclassifying an expense into an inventory account without a factual basis does not change its character, and arbitrary percentage allocations without a supporting study are precisely the kind of position that fails when it is examined. Where a cost's treatment is genuinely uncertain, we say so in writing and size the exposure rather than presenting it as settled.

COGS SUPPORT ≠ ARBITRARY EXPENSE ALLOCATION

Substantiation

Documentation for 280E Tax Positions

The records that support a 280E tax position are the general ledger detail, vendor invoices, payroll records, inventory records and physical counts, costing support, month-end reconciliations, entity records and the tax workpapers that connect them to the return. A position is only as strong as the trail from the transaction to the workpaper.

  1. Transaction
  2. Documentation
  3. Accounting
  4. Workpaper
  5. Tax position
  • General ledger detail retained at transaction level for each period
  • Vendor invoices and purchase orders matched to receiving records
  • Payroll registers, function coding and time records where relevant
  • Inventory records, rollforwards and physical count sheets
  • Costing support describing how product cost is built
  • Month-end reconciliations for bank, cash, inventory and payroll
  • Entity records: agreements, bank accounts, intercompany balances
  • Workpapers that cross-reference each figure back to the ledger

Documentation improves the quality and defensibility of a filed position. It does not guarantee any particular outcome in an examination, and no accountant can promise one. What documentation reliably does is shorten the response time when records are requested and keep the discussion focused on facts already in evidence. Examination support is scoped separately under audit representation.

By license type

280E for New Mexico Dispensaries

For dispensaries, 280E work centers on retail sales and cash reconciliation, inventory valuation, cost of goods sold support, payroll coding and store-level expense records, because where Section 280E applies the treatment of retail operating costs may differ from the treatment of product cost.

  1. Sales
  2. Inventory
  3. COGS
  4. Gross profit
  5. Tax workpapers

A retail engagement begins with whether daily sales, payments, cash and deposits reconcile to the ledger. Until they do, gross profit is an estimate, and any tax position built on it inherits that uncertainty. From there the focus moves to product cost: what the store paid, what it received, what it holds and what it sold, each supported by records rather than by a report from a single system.

We do not make blanket statements about which retail expenses are or are not deductible. That determination depends on current federal tax treatment and the specific facts of the store, including how space, labor and functions are actually used and documented. Full retail accounting is scoped under dispensary accounting.

By license type

280E for Cannabis Cultivators

For cultivators, 280E work centers on production cost accumulation — direct materials, production labor, facility activity, work in process where appropriate and finished goods — so that inventory values and cost of goods sold reflect documented production activity rather than an after-the-fact allocation.

  1. Inputs
  2. Production activity
  3. Work in process
  4. Finished goods
  5. COGS support

Production accounting asks a different question than retail accounting. Instead of what was purchased, it asks what was consumed, by which activity, over what period, and how that cost attaches to product that may take months to become saleable. Whether a particular facility, labor or overhead cost is properly absorbed into inventory for federal tax purposes is fact-specific and depends on the taxpayer's methods and current federal tax treatment.

The practical work is unglamorous: consistent batch or cycle identification, labor coded to production functions with records behind it, facility costs measured in a way that can be explained, and a written description of how cost flows into inventory and out to cost of sales. Ongoing production accounting is scoped under cultivation accounting, with background in the New Mexico Cultivation Accounting Guide.

By license type

280E for Cannabis Manufacturers

For manufacturers, 280E work centers on raw materials, production labor, packaging, conversion activity and finished goods, so that product cost and cost of goods sold are built from bills of materials and production records that can be traced and explained.

FINANCIAL ACCOUNTING CLASSIFICATION ≠ AUTOMATIC FEDERAL TAX TREATMENT

Manufacturing introduces yield. Input weight and output units rarely correspond one to one, and the difference between them has to be explained by process rather than absorbed as a variance nobody can account for. A defensible product cost requires a documented recipe or bill of materials, recorded production runs, packaging and component costs, and a consistent method for handling scrap, rework and testing.

As with cultivation, the fact that a cost is capitalized into inventory for financial reporting does not determine its federal tax treatment. We document the method, apply it consistently, and identify where treatment depends on facts that could reasonably be read differently. Ongoing work is scoped under manufacturing accounting.

Records

Payroll & 280E

Payroll affects 280E through records rather than labels. Where labor cost may be absorbed into inventory, the support comes from consistent function and location coding, payroll registers that agree to the ledger, and time or activity records — not from the name of the account a wage was posted to.

  • Employees coded by function and location in the payroll system
  • Payroll registers reconciled to the general ledger every period
  • Payroll liabilities cleared and agreeing to filings
  • Time or activity records where labor is split across functions
  • Consistent treatment of overtime, bonuses and benefits
  • A written description of how labor cost reaches inventory, if it does

We do not state that all production labor is deductible or that all administrative payroll is nondeductible. Both are fact-specific determinations that depend on what the employee actually did, what records exist and current federal tax treatment. Payroll processing and compliance is scoped under cannabis payroll.

Structure

Chart of Accounts for 280E Support

A chart of accounts supports 280E when it carries enough detail to produce inventory, COGS, payroll, location, department and operating-expense information without manual rework at year end — so tax workpapers can be assembled from the ledger rather than rebuilt beside it.

  • Inventory accounts by stage or category, not one undifferentiated balance
  • Cost of sales separated from operating expense
  • Payroll separated by function and, where relevant, location
  • Location or class dimensions applied consistently across entities
  • Operating expenses at a granularity that answers questions once
  • Balance-sheet clearing accounts defined, owned and reconciled

A chart of accounts is built to describe the business accurately. It is not built to manufacture a tax outcome, and a structure designed only to move costs toward a preferred treatment tends to make positions weaker rather than stronger, because the mapping stops matching what the business actually does.

Cadence

280E & Month-End Close

  1. Transactions
  2. Reconciliation
  3. Inventory review
  4. COGS review
  5. Month-end close
  6. Tax workpaper support

A monthly close is where 280E support is actually created. Inventory is reconciled while the count sheets and package records still exist, payroll is coded while the schedule is still known, variances are investigated while someone still remembers the event, and documentation is attached while the invoice is still findable. None of that is available in the same quality nine months later.

Waiting until tax season converts routine review into cleanup. The preparer inherits unreconciled balances and unexplained movements, and the only remaining options are to reconstruct the year at cost or to file positions with weaker support than they needed to have. Both outcomes are avoidable with a close that finishes each month.

Distinction

280E & Financial Reporting

FINANCIAL REPORTING ≠ TAX RETURN

Financial statements exist to help management, lenders and investors understand the business. Tax workpapers exist to support what is reported on a return. The two serve different purposes and can legitimately treat the same item differently, but both should trace back to the same reliable accounting records — if they trace to different records, one of them is unsupported.

ACCOUNTING TREATMENT ≠ AUTOMATIC TAX TREATMENT

In practice this means we maintain a clear bridge: the financial statements, the trial balance, the adjustments made for tax purposes and the reason for each. Management reporting is scoped under financial reporting.

Liquidity

280E & Cash Flow

PROFIT ≠ CASH

Where Section 280E applies, the federal tax computation may be based on a figure that differs substantially from the cash a business has generated. That makes tax planning a liquidity question as much as a compliance question: an obligation can come due in a period when working capital is already committed to inventory, payroll, vendor terms and debt service.

  • Income tax cash requirements modeled from current-year results, not last year's
  • Estimated tax coordination scheduled against the operating calendar
  • Inventory investment planned as a use of cash, not a residual
  • Payroll and vendor obligations mapped to the same cash forecast
  • Debt service and capital commitments included in the same view
  • Working capital monitored so a tax payment is not a surprise

Forecasting and liquidity work is scoped under cash flow planning.

Advisory

280E & Fractional CFO Support

  1. Accounting
  2. Tax analysis
  3. Cash forecast
  4. Management decision

Once accounting is reliable and the tax picture is understood, the questions become managerial: what a new location, a production expansion, a pricing change or a capital purchase does to margin, liquidity and tax exposure. Scenario analysis is the point at which 280E planning stops being a compliance cost and starts informing decisions before they are made.

Budgeting, forecasting, capital planning and management reporting at that level are scoped under fractional CFO and business advisory.

Scale

Multi-Location Cannabis Businesses & 280E

  1. Location A
  2. Location B
  3. Location C
  4. Standardized accounting
  5. Supported workpapers

Multiple locations multiply the number of places a record can diverge. The requirement is standardization: the same chart of accounts, the same close calendar, the same inventory procedures and the same payroll coding at every site, so that consolidated figures mean the same thing everywhere they appear.

  • Location-level accounting with a consistent dimension structure
  • Inventory tracked and reconciled by location, including transfers
  • Payroll coded by location and function at the source
  • Shared costs handled by a documented, factually grounded method
  • Store and facility reporting produced from the same close
  • Accounting methods applied consistently rather than per-site improvisation

Shared costs deserve particular care. A method for handling costs that genuinely serve multiple locations should reflect a real measure of use and be documented; a round percentage chosen because it is convenient is not a method.

Scale

Multi-Entity Cannabis Businesses & 280E

ENTITY STRUCTURE ≠ AUTOMATIC 280E SOLUTION

Where a group operates through more than one entity, each entity needs its own books, its own bank accounts, clear ownership of inventory, and intercompany balances that are recorded on both sides and settle. Shared costs between related parties need written agreements and records showing what was actually provided.

  • Separate general ledgers, not one ledger with entity tags added later
  • Entity-level bank accounts with no commingled activity
  • Documented ownership of inventory at each point in the chain
  • Intercompany balances reconciled and eliminated deliberately
  • Written agreements for any shared cost or service
  • Tax filings coordinated across entities on the same records

Creating an entity does not by itself change federal tax treatment. Substance governs: what the entity does, who it employs, what it owns and what the records show. We do not recommend or implement arrangements whose purpose is to create the appearance of separate activity that does not exist.

Caution

280E & Entity Structuring

Entity structure legitimately affects accounting, contracts, operations, ownership, liability, financing and how tax filings are organized. Those are real considerations, and structure decisions are made with counsel — we support them with accounting and tax analysis rather than prescribing legal structures.

What structure does not do is automatically remove federal tax restrictions. We do not promote management-company schemes, expense-shifting structures, artificial service-company arrangements or allocations unsupported by facts. Where a structure is genuine, the records should show it without needing an explanation; where it is not, no amount of documentation makes it hold. Entity questions are scoped under entity structuring.

Diagnostics

Common 280E Accounting Problems

COGS is calculated only at tax time

Investigate whether inventory is being valued during the year at all, and whether any rollforward exists to support the annual figure.

Inventory doesn't tie to the books

Compare the inventory records, the last physical count and the general ledger balance, then identify the period the divergence began.

Payroll is not coded consistently

Review function and location coding at the payroll source and whether registers reconcile to the ledger each period.

There are unsupported journal entries

Trace recurring or round-number entries to documentation; entries without support should be explained or reversed and rebuilt.

No documentation for cost classifications

Determine whether a written method exists at all, and whether the method that is described matches what the ledger actually does.

Books and tax workpapers disagree

Rebuild the bridge from trial balance to workpaper and identify each unexplained difference before filing anything further.

Arbitrary percentage allocations are used

Examine the basis for the percentage. Allocations should reflect a measurable driver that can be documented and repeated.

Seed-to-sale quantities used as tax inventory value

Confirm whether valuation exists separately from quantity tracking, and rebuild inventory value from purchase and production records.

Multiple entities are mixed together

Separate the ledgers and bank activity, then reconstruct intercompany balances so each entity's records stand on their own.

Workpapers can't be traced to the ledger

Add cross-references from every workpaper figure to the account and period it comes from, and correct anything that will not tie.

Caution

Dangerous 280E Assumptions

“Every operating cost can be moved into COGS.”

Which costs are properly absorbed into inventory is fact-specific and rule-driven. Relabeling without a factual basis does not change a cost's character.

“Metrc calculates tax COGS.”

Seed-to-sale platforms track quantity and movement for compliance. They do not produce a supported inventory valuation for tax purposes.

“A management company automatically solves 280E.”

Substance governs. Related-party arrangements are examined on what actually happens and what the records show, not on how they are named.

“Payroll coding alone determines deductibility.”

Coding creates a record. The treatment depends on what the employee did, the documentation behind it and current federal tax treatment.

“Financial statement classification determines tax treatment.”

Book and tax treatment can legitimately differ. Financial classification is evidence, not a conclusion.

“Entity structure overrides substance.”

Structure matters when it reflects real, separate activity. When it does not, the structure is unlikely to be respected.

“Rescheduling automatically solves every cannabis tax issue.”

Changes in federal treatment affect specific rules and periods. Inventory accounting, documentation and recordkeeping obligations remain either way.

Cadence

Year-Round 280E Tax Planning

  1. Monthly accounting
  2. Quarterly review
  3. Year-end planning
  4. Return preparation
  1. 01Monthly bookkeeping completed and reconciled on a fixed calendar
  2. 02Inventory reviewed each period and rolled forward against the ledger
  3. 03COGS support refreshed with the period's purchase and production records
  4. 04Financial reporting issued so results are known while they can still be acted on
  5. 05Estimated tax coordination based on current-year results
  6. 06Quarterly review of positions, documentation gaps and open questions
  7. 07Year-end planning ahead of the close, not after it
  8. 08Tax workpapers assembled from the ledger and handed to preparation

The right frequency for each activity depends on the size and complexity of the business and is set in the engagement rather than assumed. What matters is that the cadence exists and is followed, so that nothing material is discovered for the first time at filing.

Remediation

280E Accounting Cleanup

  1. Diagnose
  2. Reconcile
  3. Document
  4. Correct supported entries
  5. Rebuild workpapers
  • Unreconciled inventory balances and missing rollforwards
  • Cost of goods sold without underlying support
  • Misclassified or inconsistently coded expenses
  • Stale balance-sheet accounts nobody owns
  • Entities whose activity has been recorded together
  • Missing vendor, payroll or count documentation
  • Journal entries with no explanation or source
  • Workpapers that no longer agree to the ledger

Cleanup starts with a diagnostic of what can be supported and what cannot, because that determines the scope honestly. Not every historical record can be reconstructed perfectly — where source documentation no longer exists, we say so, document the limitation and establish a clean starting point going forward rather than fabricating support.

Deliverable

280E Tax Workpapers

  1. General ledger
  2. Supporting schedules
  3. Tax workpapers
  4. Return
  • Trial balance agreeing to the closed general ledger
  • Inventory schedules and rollforwards by category or location
  • Cost of goods sold support tied to inventory activity
  • Payroll support by function, location and period
  • Fixed-asset schedules with additions, disposals and depreciation
  • Entity balances and intercompany reconciliations
  • Adjustments listed individually with the reason for each
  • Tax classifications documented and cross-referenced to source

A complete workpaper set means a preparer can produce the return without re-deriving the accounting, and a reviewer can follow any figure on the return back to a transaction. Return preparation itself is scoped under cannabis tax preparation.

Coverage

280E Tax Planning Across New Mexico

We work with licensed cannabis businesses throughout New Mexico, remotely and on site as the engagement requires. That includes multi-store retailers in Albuquerque, operators serving the Santa Fe market, businesses in Las Cruces and the southern corridor, Rio Rancho, Roswell, Farmington, Clovis, Hobbs, Alamogordo, Carlsbad, Gallup and Los Lunas.

The accounting work is the same discipline everywhere in the state; what differs is scale, license mix and how much cleanup a set of books needs before planning can begin. Broader practice context is on the New Mexico cannabis CPA homepage, and educational background is in the New Mexico Cannabis Tax Guide and New Mexico Cannabis Accounting Guide. For the 2026 federal picture — Schedule III, medical versus adult-use activity and mixed-use expense allocation — see Does 280E Still Apply in 2026? Medical vs. Adult-Use Cannabis After Schedule III.

Questions

280E Tax Planning questions

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Consultation

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Bring your license types, current books and open deadlines. We will tell you what needs to happen first and in what order.

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