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By Yashasvini Razdan, 4:20 PM ET
Denver-based fintech Würk intends to assist other cannabis companies, lower their tax burden and other costs after rolling out a COVID-19 payroll tax credit application program with ETaxbreaks.
MarketWatch reported that the payroll and tax compliance firm is diversifying into helping cannabis dispensaries and companies operate legally around federal banking restrictions.
Marijuana is a banned substance under U.S. federal law, classified as a Schedule I drug, depriving the industry's players of federal benefits such as tax deductions for business expenses other than the cost of goods sold (COGS) or bankruptcy, copyright, and trademark protections. Despite this, cannabis companies still have to pay taxes and report all transactions properly.
The IRS Tax Code 280E states that no deduction or credit shall be allowed in running a business that consists of trafficking a controlled substance.
This impacts cannabis businesses making it difficult for them to access traditional bank loans and Internal Revenue Service (IRS) income tax breaks. Würk has teamed up with ETaxbreaks to offer access to the Covid Employee Tax Credit (CERTC), which provides employers a tax credit of up to $33,000 per employee, to these companies.
Würk told MarketWatch that it has piloted the program with business clients and would start preparing tax credit applications with dozens of companies.
The payroll credit amounts to offering a benefit to cannabis companies already saddled with higher taxes and a loftier cost of capital than companies outside of the cannabis space.
Picture Credits - The Punch
With inputs from MarketWatch