Posternak Blankstein & Lund LLP is now Arent Fox. Read the press release

Form 8300: When To File and What To Do With Cannabis Business Cash

Cannabis businesses that regularly transact in cash need to strongly consider creating an internal policy to ensure that the Form is regularly completed and filed.
On

The cannabis business is busier than ever and with all of the other required forms and paperwork required to run and maintain a successful business, one important tax form is often overlooked.

According to the Internal Revenue Code of 1986 (Code) and the Bank Secrecy Act (BSA), persons engaged in a trade or business must complete and file a Form 8300 (Report of Cash Payments Over $10,000 Received in a Trade or Business) (Form) any time the business receives more than $10,000 in cash in a single transaction (or two or more related transactions) in the course of business. Code section 6050I(a); 31 USC 5331.

What is “Cash”

Cash, for purposes of the Form, includes the coins and currency of both the United States and any foreign country. Cash may also include: (i) cashier’s checks that are not issued with a remitter’s name; or (ii) bank drafts, traveler’s checks, and money orders with a face value of $10,000 or less. By contrast, cash does not include: (x) personal checks drawn on the account of the writer; (y) a cashier’s check with the remitter’s name; or (z) a bank draft, traveler’s check, or money order with a face value of more than $10,000.[1]

When to File the Form

The first step is figuring out when your business is legally required to complete and file the Form and that depends on the date that the payment is received. Cash payments of more than $10,000 must be reported, with a Form to be completed and filed within 15 days after receiving such payment. If the 15th day falls on a Saturday, Sunday, or legal holiday, then the due date is delayed until the next day that is not a Saturday, Sunday, or legal holiday.

Multiple Payments’ Trigger

Many businesses incorrectly think the filing requirement does not apply to them if they have not received a single cash payment totaling $10,000 or more. Not so.  The reporting requirement is triggered by the amount of the “transaction,” which the Code states includes both any single transaction of $10,000 or more, and multiple cash installment payments totaling $10,000 or more.

For example, if the first payment of the transaction is not more than $10,000, the business must add any later payments made by the same purchaser within 1 year of the first payment. Once the cash payments total $10,000 or more, the business has 15 days to complete and file the Form. Thus, for many cannabis businesses that have installment contracts for supplies, they must aggregate such payments over the course of the year to determine whether the Form has to be filed for such a contract.

Payments During Filing Period

After the business completes and files the Form, the count restarts, and any additional payments totaling $10,000 or more are subject to the same filing requirements. However, if a business is already required to complete and file a Form and receives additional payments within the 15 day period, the business is permitted to report all of the payments in one single Form.

Where to File

Businesses that are required to complete the Form have two options on how to file:

  1. Mail the form to the address given in the Form instructions; or
  2. File the form electronically using FinCEN’s BSA E-Filing System.

More information on where to file the Form can be found at bsaefiling.fincen.treas.gov.[2]

Additional Filing Requirements

In addition to completing and filing the Form, Code section 6050I(e) requires any person who files a Form to furnish a single, annual written statement to each person identified on the Form, by January 31 of the next calendar year. This filing notifies the customers who made the cash payments to the respective business, to the fact that the business has reported the transactions to the Internal Revenue Service (IRS).

Penalties for Non-Compliance

Businesses that fail to complete and file a Form for qualifying transactions may be subject to civil and criminal penalties. The IRS lists the applicable civil penalties on their website, with specific information depending on the reporting year at issue. Civil penalties can range from $100-$270 per return with certain restrictions. Criminal penalties for persons and businesses who willfully fail to file a complete and accurate Form include sanctions and fines ranging from $25,000-$500,000, depending on the type of non-compliance and the type of business entity.

Conclusion

Cannabis businesses that regularly transact in cash need to strongly consider creating an internal policy to ensure that the Form is regularly completed and filed based on the specifications noted above. Establishing such policies and procedures will help a cannabis business maintain clear and accurate records, while also ensuring compliance with federal reporting requirements.

[1] IRS Form 8300 Reference Guide | Internal Revenue Service

[2] BSA E-Filing System - Welcome to the BSA E-Filing System (treas.gov)

Smart In Your World

Arent Fox’s Cannabis group will continue to monitor this issue. Click here for the Cannabis group's full archive of analysis

Contacts

Continue Reading