Greenway Podcast Recap: Sarah Bantz Discusses Cannabis Taxation and the Road Ahead

In the ever-evolving landscape of the Missouri cannabis industry, staying ahead of tax regulations is as vital as the harvest itself.

Sarah Bantz, CPA, head of the Cannabis Accounting Division at Smith Patrick CPAs, joined hosts Brandon Dunn and Tim Picket on the Greenway Audio Magazine podcast to provide much-needed clarity on the complex world of federal and state taxation.

The Long Road to Rescheduling

Despite the buzz surrounding potential federal changes, Sarah was quick to dispel the myth that tax relief will be immediate.

“Rescheduling is a long road. There are a lot of steps to it. There’s rulemaking, public comment periods, hearings, and then potential appeals. All of that takes time. As of today, nothing’s changed.”

While there is significant discussion regarding an executive order to expedite rescheduling, Sarah emphasized that nothing’s changed as of February 2026 regarding federal income tax liabilities.

She cautioned that the rule-making process is a long road involving public comment periods and potential lawsuits from anti-cannabis groups that could further delay any actual reform. For now, her advice to operators is to prepare for 2026 to look very similar to 2025 in terms of tax liability.

Understanding the 280E Hurdle

A central focus of the conversation was IRS Code Section 280E and how it changes the way cannabis businesses calculate federal taxable income.

Sarah explained that, in practical terms, operators can generally deduct the direct cost of acquiring or producing the products they sell, commonly referred to as cost of goods sold. However, most ordinary operating expenses do not receive the same treatment at the federal level.

“Per 280E, COGS is the only cost you can deduct from sales to get to your taxable income. Everything else you paid for: the utilities, the person to sell it, your license fees, marketing, isn’t deductible at the federal level.”

That structure creates a disconnect between accounting profit and tax liability.

The result can be counterintuitive. A business might show thin margins or even operate at a cash loss after paying employees and overhead. Yet because federal taxable income is calculated largely on sales minus product cost, the tax bill can still be significant.

Key takeaways for operators

Inventory Timing

Deductions for cost of goods sold (COGS) must follow income; you can only deduct the cost of inventory as it is actually sold, not when it is purchased.

Protective Claims

Sarah recommended filing protective claims to keep the three-year window for amending returns open, should a future court decision or law change be applied retroactively.

Inventory Records Matter

Sarah noted that while track-and-trace systems are critical for compliance, they are not built to serve as accounting records. Inventory data can shift if reports are pulled after year-end, making it harder to recreate accurate numbers during tax season. Her recommendation is straightforward: pull and save inventory reports regularly, ideally monthly, so there is a clear, static record to support the company’s tax position.

Smart Move Tip for Cannabis Businesses

When asked for her best smart move, Sarah’s advice was simple: digitize your documentation.

“I wish everyone would dedicate themselves to using a phone app like Expensify to keep receipts,” she said. “Going back and getting receipts later, especially from your team, is painful and time-consuming.”

In cannabis, where deductions are already limited and documentation matters, capturing receipts in real time creates a clean audit trail and prevents year-end scrambling. Sometimes the smartest move is simply staying organized.

Smith Patrick CPAs has been a cornerstone of the Missouri cannabis industry since its inception, providing expert guidance even before the first licenses were issued. The firm has spent many years supporting organizations like the Missouri Cannabis Trade Association (MoCannTrade) and helping operators navigate the shift from medical to adult-use. As the Greenway “Best of the Industry” award-winner for cannabis accounting, Sarah Bantz and the Smith Patrick team continue to be at the forefront of advocacy and education, ensuring that Missouri’s cannabis entrepreneurs have the financial foundation to grow and succeed.