If you are considering jumping into the Cannabis industry, you need to understand some of the basic terminology that you will hear. First off, many states are utilizing a system called Metrc for compliance reporting. Is this technically relevant for tax, no, but it is relevant if you are planning to be involved with government reporting compliance. Considering most companies cannot direct differentiate between franchise taxes, sales taxes, income taxes, and other government reporting, it can fall to tax accounts to ensure all government compliance is taken care of.
So what is Metrc and why does it matter? Metrc is actually the name of a company that is helping many states implement reporting requirements; it is an acronym for Marijuana Enforcement Tracking Reporting & Compliance. According to Metrc’s website they are claiming to be “The most successfully-deployed regulatory cannabis system in the world.” They certainly do have a fair number of state contracts.
Here is a graphic with the states that use Metrc.
How do the do it? They actually track the growth of cannabis plants from seed to sale (another industry term meaning literally from planting to selling). They send the companies RFID tags to tag plants and utilize their software to move that inventory through the process. This allows the licensed cannabis companies to report to the government. It allows the government to have a clear understanding of tracking, tracing, trending, and reporting.
Most operators use another Seed to Sale system to track their inventory. These Seed to Sale systems typically integrate through Metrc’s API on the reporting side. So, if your client is doing the tracking correctly internally, the reporting should be as easy as clicking a button. If your client is not actually using a Seed to Sale, or not using it correctly, Metrc reporting could be very time consuming and include a lot of data entry. As with every compliance event, we need to be vigilant and ensure these deadlines are met.
