February 2019: Steinbruner Hill, CPAs
Chris Steinbruner, CPA / Partner
Steinbruner Hill CPAs
Tell us about your company(s) and your role?
"We are a CPA accounting firm with a focus on relationships with small and medium-sized businesses and their owners. We also work in the area of trusts and estates, and family groups.
I was formerly a partner with a larger firm, one of 22 partners. About four years ago my key group formed a small, boutique firm in Carmel in order to focus more on our clients while maintaining a strong quality of life."
What is your involvement in the cannabis industry?
"We bring to this industry our many years of tax, accounting, and business experience amongst a wide variety of businesses. We consult with our clients on bookkeeping and accounting matters, like we would with our traditional clients. Basic accounting, while always critical in a well-run business, rises to extreme importance in the cannabis industry, due to a lack of banking and punitive income tax rules.
For example, in order to maximize deductible 'cost of goods sold', the accounting system must capture expenditures in a manner which facilities accurate and defendable allocations."
What is the biggest challenge you’ve faced since you’ve been in the industry?
"Businesses in the cannabis industry face extreme challenges themselves . . . regulations, taxes, banking, legal uncertainties, etc. Sometimes accounting and record keeping is not high on the priority list, which is understandable. However, re-creating accounting records after-the-fact is very difficult and can be easily challenged by the taxing authorities. I have found that I generally cannot convince a business owner to prioritize the accounting and recording keeping functions. They either value this function early on or they don’t."
What do you bring to the industry?
"As I mentioned, we bring our many years of tax, accounting, and business experience with a variety of businesses. Focusing on 280E (non-deductibility of ordinary business expenses) is important, but it is not enough. Cannabis businesses tend to have more complicated structures than similar sized ventures in traditional sectors. Multi-entities, cash vs. accrual issues, the need for GAAP financials in order to deduct more Cost of Goods Sold, California tax differences, and outside investors are examples of some of the issues that similarly sized business do not often face. The tax and accounting issues entangled in these issues are at least as important as 280E."
Can you give us an example of how your experience relates to this industry?
"The cannabis industry includes many sub-industries with unique facets, such as agriculture, manufacturing, and retail. Agriculture, for instance, involves crop accounting, working with biological assets, and special tax accounting rules.
The agriculture industry must also deal with chemical application and testing and very tight budgets. Practicing in Monterey County, I have worked with many agriculture businesses, and served for a few years as the CFO of an agriculture company."
10 years ago, what did you think you’d be doing now?
"Exactly what I am doing now. What did you expect? I’m an accountant!"
Why did you get involved in this industry?
"Some people that I know well, had started up in the industry in different roles. I was getting questions and requests to provide services. I realized this was an exciting time to be involved in a “new” industry, and make a difference.
Prohibition, as a policy, is never successful. A responsible and healthy industry is a good thing...and accountants can play an important role in achieving this result. I only work with businesses committed to this outcome."