New York Cannabis Accounting & Tax Guide: Regulations, 280E & Compliance [2025]

The New York Cannabis accounting landscape is a dynamic and rapidly evolving market. For accountants and bookkeepers, this presents both opportunities and challenges. This article aims to provide a comprehensive overview of the regulatory environment of the sector, licensing system, tax consequences, and main financial issues—including the major influence of the 280E tax law on cannabis companies. Whether you have experience in the cannabis business or are brand new, this guide will equip you with the knowledge you need to succeed.

Historical Timeline of Cannabis Legalization in New York

Important legal changes—from a severe ban to a controlled market—have affected the growth of New York Cannabis Accounting.

Here’s a brief overview of the key events:

• 2014: Compassionate Care Act – New York legalizes medical cannabis, creating a framework for registered patients to access cannabis for specific medical conditions (New York State Office of Cannabis Management, 2018).
• 2019: Decriminalization – New York decriminalizes small amounts of cannabis, reducing penalties for possession (Community Service Society of New York, n.d.).
• 2021: Marijuana Regulation and Taxation Act (MRTA) – Legalizing adult-use cannabis, this historic law creates a thorough regulatory system for selling, processing, and growing. This bill also created the Office of Cannabis Management (New York State Office of Cannabis Management, n.d.).
• 2022: First Retail Sales – The first legal retail sales of cannabis began in New York, marking the start of the adult-use market (Office of Governor Kathy Hochul, 2022).

Key State Agencies Governing New York Cannabis Accounting and Compliance

The New York Cannabis accounting industry is overseen by several state agencies, each with distinct roles:

• Office of Cannabis Management (OCM): The OCM is the primary regulatory body for the cannabis industry (New York State Office of Cannabis Management, n.d.). It’s responsible for licensing, enforcement, and developing rules and regulations.
• New York State Department of Taxation and Finance (NYSDTF): The NYSDTF is responsible for administering state taxes, including those levied on cannabis (New York State Department of Taxation and Finance, n.d.). It provides guidance on tax requirements, manages tax collections, and enforces tax laws.
• New York State Department of Agriculture and Markets (NYSDAM): The NYSDAM has a role in overseeing certain aspects of cannabis cultivation, particularly in regard to agriculture and best practices (New York State Department of Agriculture and Markets, n.d.).

Cities Where Adult-Use Cannabis is Legal

Recreational cannabis is legal in all New York cities and in the state of New York. It has been legal for medical use since 2016 and for recreational use since 2021.

Types of Cannabis Licenses in New York

Understanding the different license types is crucial for professionals in New York Cannabis accounting, as regulations impact financial reporting and tax compliance:

• Cultivator License: Authorizes the cultivation of cannabis plants. This can include outdoor, indoor, and mixed cultivation.
• Processor License: Licenses for businesses that process cannabis products, including extraction, manufacturing and packaging.
• Distributor License: Allows the transportation of cannabis products between cultivators, processors, and retailers.
• Retail Dispensary License: Allows the direct sale of cannabis to consumers, including both storefronts and delivery.
• Microbusiness License: A license that allows a smaller operation to act as both a cultivator and processor as well as a retailer.
• Cooperative License: Licenses a collaborative group of growers who produce cannabis.
• Nursery License: Allows for the propagation of cannabis for sale to other licensed businesses.
• Testing License: Allows for third-party testing of cannabis.
• Conditional Licenses: New York has created several conditional license categories to prioritize certain communities and businesses.

For a comprehensive list and detailed descriptions of each license type, refer to the Office of Cannabis Management’s official guidelines (New York State Office of Cannabis Management, n.d.).

Understanding License Fees

License Fees, Initial Costs, Renewal Costs, and Timing:

Many elements affect the cost of acquiring and keeping a cannabis license in New York, including license type, company size, and legal requirements. These expenses are quite important for New York Cannabis Accounting techniques since they affect financial planning for both new applicants and current license holders.

• Initial Application Fees:
  • Standard application fee: $1,000 for most licenses.
  • Registered Organization Dispensary (ROD) and Registered Organization Non-Dispensary (ROND) application fee: $10,000.
  • All fees are reduced by 50% for Social and Economic Equity (SEE) applicants (New York State Office of Cannabis Management, 2024).
• Key License Fees (paid after approval):
  • Nursery License: 750–2,000 depending on facility type.
  • Cultivator License: Varies by tier and type.
    • Outdoor: 1,000–40,000 plus per-square-foot fees.
    • Mixed Light: 1,500–4,380 plus per-square-foot fees.
  • Processor License: 2,000–7,000 per premises.
  • Distributor License: 7,000 per premises (2,500 for processors).
  • Retail Dispensary: $7,000 per premises.
  • Microbusiness License: $4,500.
  • Delivery License: $4,500.
  • ROD License: $175,000 plus Tier 5 cultivation fees and a $20 million special fee (New York State Office of Cannabis Management, 2024).

License renewals are absolutely important for compliance even beyond the initial expenses. Most licenses are good for two years; renewal applications have to be turned in four to six months before they expire. Generally speaking, renewal payments match the first licensing fees to guarantee continuation for companies who satisfy legal criteria. The Office of Cannabis Management provides renewal applications 90 days before expiration, giving licensees ample time to prepare (New York State Office of Cannabis Management, 2024).

Renewal applications must include documentation of employee and owner diversity, confirmation of a maintained labor peace agreement, and evidence of an executed community benefit plan. Businesses that fail to meet the renewal deadline may be required to reapply as a new applicant, potentially delaying operations and increasing costs (New York State Office of Cannabis Management, 2024).

In order to keep compliance and guarantee long-term sustainability in New York’s controlled cannabis market, cannabis companies and their accountants have to aggressively budget for the financial consequences of license costs and renewals.

Current License Numbers

New York’s Office of Cannabis Management (OCM) has issued over 5,250 licenses in several categories as of December 15, 2024, therefore enabling the expansion of the state’s controlled cannabis market. Among these licenses are retail, distribution, manufacturing, processing, and other specialized cannabis-related ones. Particularly, social and economic equality (SEE) enterprises have obtained 54.1% of adult-use permits, underscoring the state’s commitment to a diverse and inclusive market (New York State Office of Cannabis Management, 2024).

The table below provides a detailed breakdown of the number of licenses issued across different categories, offering insight into the current structure of New York’s cannabis industry.

280E Decoupling: What New York Cannabis Accounting Experts Need to Know

Professionals in New York Cannabis accounting should take note of the tax relief granted to cannabis businesses when Governor Hochul signed legislation on November 17, 2023 (New York State Senate, 2023). The new law enables NYC cannabis operators to deduct ordinary business expenses from their local tax returns. By decoupling from Internal Revenue Code section 280E at the city level, this legislation removes a key financial restriction that had previously prevented cannabis businesses from claiming standard business deductions on their NYC taxes, despite marijuana’s continued classification as a Schedule I substance under federal law.

State Tax Requirements

State and Local Tax Compliance for New York Cannabis Accounting

Here’s a comprehensive summary of the New York Cannabis accounting and local tax requirements for cannabis businesses (New York State Department of Taxation and Finance, n.d.):

• Tax Rates (Effective June 1, 2024):
  • Distributor Tax: 9% on sales/transfers to retailers.
    • For registered organizations or microbusinesses selling directly to retail customers: 9% tax on 75% of the sale amount
  • Retail Tax: 13% on retail sales/transfers.
    • Note: Adult-use cannabis products are exempt from sales tax and vapor products tax (New York State Department of Taxation and Finance, n.d.).
• Registration Requirements:
  • Must obtain a license from the Office of Cannabis Management first.
  • Register with the NY State Tax Department ($600 application fee).
  • Obtain an Adult-Use Cannabis Certificate of Registration.
  • If selling other taxable items (pipes, rolling papers, etc.), must also obtain Certificate of Authority for sales tax (New York State Department of Taxation and Finance, n.d.).

Filing Requirements for New York Cannabis Accounting Professionals

New York-licensed cannabis companies have to submit quarterly tax reports compliant with state guidelines. These filings must be submitted on time to avoid penalties and ensure compliance with New York State tax laws. The deadlines for filing vary based on the reporting period, with businesses expected to submit their returns by the specified due dates outlined below.

Compliance Requirements and Penalties for Cannabis Businesses in New York

Cannabis businesses in New York must adhere to strict compliance requirements set by the New York State Department of Taxation and Finance to maintain their licenses and avoid penalties. Below are key compliance obligations that businesses must meet:

• Tax Filing Obligations: Businesses must file tax returns even if no sales were made during the reporting period.
• Submission Process: All tax filings must be submitted online through the Tax Department’s Adult-Use Cannabis Products Tax Web File application to ensure transparency and regulatory oversight.
• Recordkeeping Requirements: Businesses are required to maintain complete financial records for at least three years, allowing for audits and regulatory reviews as needed (New York State Department of Taxation and Finance, n.d.).

Banking & Financial Compliance

Beyond tax filing and recordkeeping, cannabis businesses must carefully manage their banking arrangements to prevent compliance issues:

• Bank Account Authorization: If a business’s bank account has debit blocks, they must clearly approve tax payments so that payments don’t get held up.
• Failure to Obtain Proper Registration: Businesses that fail to register properly may face fines of up to $7,500 for the first violation and $15,000 for subsequent violations.
• Recordkeeping Violations: Poor recordkeeping could result in fines of up to $500 every month.
• Late Tax Filings & Payments: Delayed tax filings or payments will result in additional penalties and interest charges.
• Selling to Unregistered Retailers: This is one of the most severe infractions, carrying a $50,000 fine for the first offense and a $100,000 fine for subsequent violations (New York State Department of Taxation and Finance, n.d.).

Additional Tax Considerations

Businesses must also be aware of specific tax-related requirements that may impact their operations:

• Tax Exemptions: There are some tax breaks for sales to people with cannabis research licenses, which lowers the tax burden for those transactions.
• Local Jurisdiction Reporting: Tax reporting requirements may vary depending on the location of retail dispensaries, requiring businesses to stay updated on local regulations.
• ACH Payment Considerations: Different Automated Clearing House (ACH) company IDs are required for cannabis registration payments and tax payments, making careful financial management and tax planning essential (New York State Department of Taxation and Finance, n.d.).

Adhering to these compliance measures is critical for avoiding penalties and maintaining good standing with regulatory authorities. Proper tax planning, financial recordkeeping, and understanding state-specific requirements will help cannabis businesses navigate the complexities of New York’s regulated market.

Overview of New York State Cannabis Performance and Tax Revenue

Since the start of adult-use cannabis sales, the New York cannabis market has seen notable expansion, exceeding $1 billion in total sector sales (New York State Office of Cannabis Management, 2024). With the adult-use market alone expected to generate $757.8 million in sales in 2024 alone, the industry is still proving to be a significant driver of the economy. Monthly growth has been remarkable, with sales increasing from just $2.2 million in January 2023 to $131.4 million by November 2024, reflecting the expanding accessibility and consumer adoption of regulated cannabis products (New York State Office of Cannabis Management, 2024).

Revenue by Fiscal Year

The state has reported significant revenue contributions from medical cannabis, cannabinoid hemp, and adult-use cannabis.

• 2023-2024 (Total Revenue: $80.2M)
  • Medical Cannabis: $10.7 million
  • Cannabinoid Hemp: $1.1 million
  • Adult-Use Cannabis: 68 million
• 2024-2025 Mid-Year (Total Revenue: $67M)
  • Medical Cannabis: $2.4 million
  • Cannabinoid Hemp: $620K
  • Adult-Use Cannabis: $64 million (New York State Office of Cannabis Management, 2024).

These figures indicate the growing dominance of adult-use cannabis sales, with medical cannabis and hemp-based products contributing smaller portions of overall revenue.

Key Program Highlights

Beyond sales and tax income, New York’s cannabis laws center on equity, enforcement, and product safety.

As of 2024:

• 54.1% of adult-use cannabis licenses have been given to businesses that prioritize social and economic equity (SEE). This shows that the state is serious about helping communities that were hurt by prohibition in the past.
• Enforcement has stepped up, and over 1,300 checks have been done across the state to make sure people are in compliance with the state regulations.
• Product safety remains a priority, with over 12,200 cannabis product lots tested for quality and compliance.
• The medical cannabis program continues to serve 100,000+ registered patients, ensuring access to regulated medical products.
• New York has also implemented energy use standards and waste minimization initiatives to promote sustainability in the cannabis sector
• Home Cultivation: Regulations permitting personal cultivation of cannabis are now in place, allowing eligible individuals to grow a limited number of plants for personal use while ensuring compliance with state guidelines (New York State Office of Cannabis Management, 2024).

Tax Revenue Distribution

A big chunk of the money from the cannabis tax goes to community reinvestment projects that try to make up for wrongs done in the past because of the prohibition of cannabis.

The tax revenue is distributed as follows:

• 40% directed toward community reinvestment, specifically benefiting communities disproportionately impacted by past drug policies.
• A strong emphasis on small business participation and industry equity ensures that funds are reinvested to support minority-owned businesses and underrepresented entrepreneurs in the cannabis space (New York State Office of Cannabis Management, 2024).

The cannabis industry’s continued growth in New York shows how important it is to the state’s economy. Efforts to regulate the industry make sure that growth, fairness, and compliance are all taken into account.

New York Cannabis Regulations

State Regulations:

The OCM provides a comprehensive set of regulations that directly impact New York Cannabis accounting practices (New York State Office of Cannabis Management, n.d.). These are always changing and need careful reading to guarantee compliance.

Key regulatory areas include:

• Licensing Requirements: Details of all license types, application requirements, and renewals.
• Operating Standards: Requirements for business operations, including security, recordkeeping, and sanitation.
• Packaging and Labeling: Standards for how cannabis products must be packaged and labeled, which must be compliant with state and federal laws.
• Testing and Quality Assurance: Regulations for testing requirements and quality control.
• Advertising and Marketing: Rules for advertising and marketing cannabis products.
• Track and Trace Requirements: Regulations for tracking cannabis from seed to sale.

Access the full text of the New York cannabis regulations here.

Inventory Management

BioTrack Inventory Management and Compliance in New York Cannabis Accounting

New York’s Office of Cannabis Management (OCM) mandates that all cannabis licensees use an electronic inventory tracking system to monitor the movement of cannabis products from seed to sale (New York State Office of Cannabis Management, 2024a). While BioTrack THC is the state’s contracted solution, licensees are not required to use BioTrack as their inventory tracking system. Instead, they may select any third-party inventory tracking software, provided that it can integrate with OCM’s BioTrack system via an application program interface (API) (New York State Office of Cannabis Management, 2024b). The NY-API can be accessed through OCM’s sandbox testing environment, allowing vendors to verify integration before full implementation (New York State Office of Cannabis Management, 2024b).

Key Features of the BioTrack System

• Mandatory Compliance: All licensees must have a third-party inventory tracking system that transmits data to BioTrack using the NY-API (New York State Office of Cannabis Management, 2024b).
• Integration Deadline: Full integration with BioTrack must be completed by January 17, 2025 (New York State Office of Cannabis Management, 2024b).
• Inventory Tracking & Data Collection: Ensuring real-time supply chain visibility, the system tracks farming, harvest, processing, testing, and retail transactions (New York State Office of Cannabis Management, 2024a).
• 16-Digit Unique Identifiers: Each cannabis plant and product must be tagged with a 16-digit identifier, which will be required for compliance reporting (New York State Office of Cannabis Management, 2024b).
• Laboratory Testing Integration: The system links directly with testing facilities to track product safety and quality assurance (New York State Office of Cannabis Management, 2024b).
• Sandbox Testing for Vendors: A sandbox environment is available for software vendors to test API integration before going live (New York State Office of Cannabis Management, 2024b).

Implementation & Vendor Selection

Licensees must choose an inventory tracking vendor capable of transmitting required data via API to OCM’s BioTrack system. OCM does not impose a fee for data submission but licensees are responsible for purchasing and maintaining their own tracking system (New York State Office of Cannabis Management, 2024b).

To assist with integration, BioTrack is offering training webinars through January 2025, covering topics such as:

• Cultivation & Manufacturing Processes
• Testing Laboratory Procedures
• Retail & Delivery Operations
• Third-Party System Integration (New York State Office of Cannabis Management, 2024b).

Support & Compliance

Licensees must ensure full compliance with OCM’s inventory reporting requirements, including routine inventory submissions and maintaining supplemental records such as manifests and invoices (New York State Office of Cannabis Management, 2024b). Vendors and licensees can seek technical support through the following contacts:

• Licensee Support: NYHelp@biotrackthc.com
• Technical Integration: NYIntegrator@biotrackthc.com
• Compliance Questions: compliance@ocm.ny.gov
• Laboratory Inquiries: laboratories@ocm.ny.gov

Licensees have to make sure their systems are completely integrated with BioTrack by January 17, 2025, if they are to satisfy compliance requirements. As integration advances, the OCM will offer more direction; licensees should routinely review the BioTrack system and OCM updates for the most current criteria (New York State Office of Cannabis Management, 2024b).

Key Takeaways:

Although the cannabis market in New York presents great potential, one must have a complete awareness of the accounting, tax, and legal environment. Accountants and bookkeepers can be rather important in the success of companies in this expanding market by keeping current with the most recent advancements and consulting experts. The National Association of Cannabis Accounting and Tax Professionals is here to support you on this journey.

• The legal landscape is complex and constantly changing.
• Understanding state and local taxes is critical.
• Federal 280E rules create unique challenges.
• Robust accounting and inventory management practices are essential for success.
• License fees and renewal costs should be planned for.

Note: This blog post is intended for informational purposes only and shouldThis blog article should only be used for informational purposes; it is not professional tax or accounting advice. For advice specifically suited to your circumstances, always speak with licenced professionals.

Need a New York-based accountant specializing in the cannabis industry? The National Association of Cannabis Accounting and Tax Professionals offers a directory of qualified professionals to assist you. Find a New York accountant here.

Are you ready to master New York Cannabis accounting and connect with a network of top cannabis accounting professionals? Join the National Association of Cannabis Accounting and Tax Professionals today and gain access to exclusive resources, networking events, and continuous education.

References:

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      2. Community Service Society of New York. (n.d.). Marijuana decriminalization fact sheet. Retrieved March 2, 2025, from https://www.cssny.org/pages/marijuana-decriminalization-fact-sheet
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