Late last year, Scott Bailey appeared on the Texas Hemp Show podcast with Texas Hemp Reporter magazine’s publisher Russell Dowden. There, the certified public accountant at the Raleigh-based firm Carr, Riggs & Ingram (where he is also partner) discussed research grants, opportunities in the hemp industry, market recovery after an over-saturated 2019 growing season, as well as challenges hemp farmers faced in the pandemic year.
Now Mr. Bailey, formerly the treasurer for the North Carolina Industrial Hemp Association, has returned just in time for tax season to provide Texas hemp farmers (and even those considering getting into the industry) sound advice in navigating their financial futures.
He wants hemp farmers to realize, first and foremost, that hemp is a very unique crop, one that grows and is farmed quite similarly to tobacco. “It takes on a lot of character of the soil that it’s planted in,” Mr. Bailey said. “So if you have soils with pesticides and fungicides, which can have traces of heavy metals in the soil around where you’ve planted hemp, then that plant will take on those characteristics. That creates risks, because if you have pesticides and fungicides not approved by the FDA, you can’t sell hemp flower.”
TIPS FOR HEMP FARMERS DOING THEIR 2020 TAXES
- Plan Early. Filing and paying tax liabilities earlier than standard corporate and business deadlines can create some relief in making estimated tax payments. This way, before the crop actually comes in, you’re not having to estimate your income or make estimated payments.
- Find the Right CPA. Do your research, really doing a deep dive into the tax professional with whom you would be working. Do specific Google searches, and thoroughly read a tax professional’s website, pu and LinkedIn page. Also, try asking a CPA directly about what they know about the hemp-farming industry. “You’ll know pretty quickly if they know what they’re talking about,” Mr. Bailey said.
ADVICE TO ROOKIE HEMP FARMERS
- Know the BIG THREE Long Before You Harvest. Know your seed, your soil and your source of sales. Will where you plant a specific seed variety produce strong yields? Is the soil clean and free of heavy metals and contaminants? Lastly, be sure you can convert this profitable plant to cash by knowing well in advance how and where you’re going to sell your product.
- Line Up Your Testing Lab Early. Being such a new industry, there’s a shortage of testing labs in the U.S. So early in the business-development process be sure that you have a working relationship with a lab so that you can make sure your product has less than the legal threshold of 0.3 percent THC content.
- Start Small. Not until there is a standard commodity price for hemp will crop insurance be available for hemp farmers, as a standard commodity price can be the only surefire way for insurance companies to accurately evaluate risk. “Our advice for a lot of people getting into hemp farming is, start small, get used to it, get good at it, and then increase your quantities. Be as sure as possible that what you’re growing you know you can sell.”
- Hire a Knowledgeable CPA to Help You Jump through the Hoops of Grant Funding. An accountant who understands the hemp industry can you help apply for various types of grants, assisting you as you navigate your way through additional accounting requirements such as state and federal grant fund expenditures and various compliance’s.
For more information, visit cricpa.com.