Automated IRC 280E Compliance
Stop guessing at 280E. Automatically classify expenses, optimize COGS deductions, and generate audit-ready reports.
Key Benefits
Automatic Expense Classification
Every expense is automatically categorized as COGS-deductible or disallowed under 280E. No manual sorting required.
COGS Optimization
Maximize your legal deductions with proper allocation of direct materials, direct labor, and indirect production costs.
Audit-Ready Reports
Generate 280E compliance reports that show exactly how expenses are classified and how COGS is calculated.
Multiple Costing Methods
Support for FIFO, LIFO, and weighted average inventory costing per IRS Revenue Procedure 2010-13.
Real-Time Tax Position
See your estimated tax liability at any point during the year. No surprises at filing time.
Separate Business Tracking
Track expenses for separate trades or businesses alongside your cannabis entity for maximum tax efficiency.
How 280E Classification Works
When you enter an expense in CannaBooks Pro, our system automatically determines whether it qualifies as Cost of Goods Sold under IRC Section 280E. Direct materials, direct labor, and indirect production costs are classified as COGS-deductible. Administrative, marketing, and other operating expenses are flagged as disallowed. You can review and adjust classifications at any time, with a full audit trail of every change.
Built for IRS Compliance
Our 280E engine follows IRS guidance and Revenue Procedure 2010-13 for inventory costing. Every classification decision is documented with the specific tax code rationale, giving you a defensible position in the event of an audit. The 280E report provides a clear summary of your compliant tax position that your CPA can use directly for filing.
Savings That Add Up
Cannabis businesses that properly optimize their 280E classifications typically save $10,000 to $100,000 per year in federal taxes compared to those using generic accounting software. The difference comes from correctly allocating indirect production costs to COGS — expenses like production facility rent, utilities for grow rooms, and quality testing that many operators incorrectly classify as operating expenses.