Whether your state is legal for adult use (such as Oregon, Washington, Alaska, California, Colorado, etc.) or medically legal (29 states), the tax implications remain the same, and finding a good CPA can be daunting. Just getting to a good list of questions to ask a cannabis CPA can be impossible.

We have been in the cannabis industry for years, helped hundreds and hundreds of businesses, and often are asked about what makes for a “good” cannabis focused CPA.

The list below, while not exhaustive, should help point you in the right direction and at least weed out (pun certainly intended) folks who simply will not meet basic requirements.

1. What certifications do you hold? 

A lot of the folks entering the industry are doing so out of lack of options versus passion for the industry. As such, does your CPA have an accounting degree, CPA (certified public accountant) certification, EA (enrolled agents), MBA (Master of Business Administration)? Different certifications can provide a certain level of assurance as to expected quality of tax return preparation, and highlights more importantly what someone is NOT certified to do. Make sure your CPA/EA/etc. has the background and certifications you need. 

Beyond this, it is good to check on where someone is licensed, then actually go to that State Accountancy Board website and look up that person’s license. From there you will have a good view as to whether they have been disciplined by an Accountancy Board currently or in the past.

2. How many years’ experience do you have? 

This should be obvious, but in this industry, you really don’t want your CPA to be learning their craft on your business. There is a GIANT amount of learning curve that CPA’s undergo in the first 5 years of practice, let alone the first few years in cannabis. This is even more so when a CPA can achieve employment with a “Big 4” firm (we will discuss this in a later point).

3. What industries have you worked in?

Outside of understanding cannabis specific issues and practices, having a CPA with a varied background will be quite beneficial as they will have insights that someone who has been wedged in one industry for 20 years just won’t have. Experience in retail, manufacturing, agriculture industries is an obvious benefit as well. 

4. Have you worked internally for any cannabis companies?

This is a bit of a BONUS style question. You will be able to find CPA’s who do not have operational/inside experience working within a cannabis company, that will still be able to help you achieve great success. But if you have two CPA’s that are 100% matched against each other, wherein one has managed internally, I would likely utilize the services of the CPA with internal experience as they will have seen things that someone on the outside looking in will not have had exposure from. 

5. Why did you join the industry?

Now, you would think a CPA in this industry would be prepared to answer this question, but you will be surprised by the answer you get from a lot of people. If your CPA isn’t PASSIONATE about this industry, they will at some point place their cannabis clients at the bottom of the pile. Why? There are just easier ways to make money as a CPA than working with cannabis companies. At this current level of maturity of the industry, there is a lot of hand holding, revisions, and messy clean up that takes place within these companies.

6. Do you use IRC 263A to allocate mixed service costs?

This will not mean much to you now, but it is a VERY important part of limiting IRC 280E impact on cannabis companies. If your CPA is not using 263A, you are overpaying on taxes, plain and simple. 

7. How do you deliver sensitive information to clients?

CPA’s tend to be behind the times, which means they are still handling a lot of business via paper, as well as sending a lot of personal information through email. You want to work with someone that can operate paperless (saves time and money) and utilizes secure servers and means of delivering info to you. There is already plenty of risk in this industry, you really don’t want to have to worry about sensitive information being stolen electronically due to lax data security protocols. 

8. Have you or any of your staff ever been convicted of a non-traffic related crime? Was that crime directly related to your work?

Do you really need an explanation here? The public tends to think that if someone has a CPA license that it means they have never been in trouble… think again. There are plenty of FELONS that are CPA’s, you should probably make sure that your CPA isn’t one of them. “Street Cred” isn’t something your CPA needs.

9. Do you have experience working in public accounting? Was any of that experience at the “Big 4” level?

A CPA that has only ever worked internally at a company will not have had the opportunity to work on the amount and varying type of issues that someone in public accounting will have seen. Now, that experience may be EXACTLY what you need, but usually that is only the case when someone is looking to hire a CFO, not a CPA. 

Discussing the Big 4 is usually where CPA’s without Big 4 experience get upset. Please note, I am not saying that being a Big 4 accounting firm alumnus makes you better than someone without that experience. Remember “Big 4” is simply a reference to the biggest four CPA firms in the US. PwC, Ernst Young, Deloitte, and KPMG. 

When a CPA has a background in Big 4, especially for an extended number of years, that person has been through ten times the number of situations that someone from a small firm has seen. This isn’t to say that they aren’t as good of a CPA, I am simply pointing out that your chances of finding a high-level CPA are greater with a Big 4 accountant as they have been subjected to a large amount of high level, high stress work with very high expectations of completion and quality. Again, Big 4 experience doesn’t mean the CPA will be great, but I personally find that the chances of hiring a good CPA go up when looking at Big 4 candidates versus non-Big 4 candidates (all other things equal of course)

10. Have you successfully defended any clients in the face of an IRS audit?

This will simply help put the cherry on top of the interview as it will get to the heart of the CPA candidate’s experience level. “Pump and dump” firms exist all over the place, including the cannabis industry. They are attentive when accepting retainers, attentive to get your e-file form signed, then you never hear from them again. Preparing a return is one thing, defending it under IRS audit is another matter altogether. If you are looking for a CPA to partner with your company for success, having even minor tax audit experience will be beneficial.