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Mike Goral, Leader at Armanino’s Cannabis Tax group – Interview Series

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“In the next 3-5 years, I see an acceleration of cannabis legalization in Europe.  There’s going to be a domino effect once one or two European Union countries legalize cannabis.  Because of EU trade rules and laws, it’s simply going to be easier for everyone to follow suit.”

Mike Goral

Section 280E prohibits business that are involved in the sale of controlled substances (including marijuana which is still under schedule 1 of the CSA) from deducting typical business expenses. This taxation law, which was enacted in 1982 due to the popularized War on Drugs, complicates cannabis taxation and bumps up the cost of each gram of cannabis by about 30%.  This of course fuels the illicit cannabis market.  In this interview Mike Goral, a cannabis tax expert, explains to us the nuances of Section 280E and what this means for the regulated cannabis industry. He goes further to give his predictions for the cannabis industry in the next 3-5 years.

The cannabis industry is one that many would rather not associate with. How did your career path lead you here?

I was a partner at a Big Four accounting firm specializing in state and local tax.  As states first began to legalize adult use of cannabis, I quickly realized companies would need professional help.  So, I quickly got up to speed on all the relevant regulations and compliance and got to work.  I was living in Texas at the time and moved to California to be closer to where all the action was happening.  State after state legalized cannabis in the late 2010s, providing plenty of work.

It was at that time Thomson Reuters approached me to build a comprehensive resource for multi-state taxation of cannabis.  This was all in the middle to late stage of my career, so sure there’s a risk to leaving your expertise for a new specialty, but there’s just too much growth in cannabis to ignore it.

Tell us more about your role as head of the Armanino's Cannabis Tax group.

I got introduced to Armanino through one of the firm’s clients who recommended me as the firm was investing in a cannabis industry practice group.  Since we’ve launched, we have grown our cannabis practice by nearly 800%.  That just shows how rapidly this industry is growing across the United States.  As the markets on the East Coast open up, I find myself a bicoastal professional going between the New York tri-state area and California every few weeks with stops in Denver and Chicago.

We help cannabis companies on a wide variety of services from tax consultation on 280E to audit and assurance, cash management and multiple technology platforms. We even advise on business management issues and can assist with outsourcing human resources and CFO advisory.

IRC Section 280E is a headache to many cannabis businesses. What's your take on this taxation law?

Section 280E puts cannabis companies at a significant disadvantage for no other reason than cannabis’ Schedule I status.  We are seeing state after state adopting cannabis legalization for both medical and adult use, yet the federal government continues to overly tax this industry.  This is all happening in an environment where popular support for cannabis legalization is at an all-time high and even a Supreme Court justice questioned the wisdom of federal criminalization.

What 280E does is make the cost of products higher and encourage the continuation of the illicit market.  Taxes can be devastating for companies that don’t have the cash flow to stay afloat or access to capital opportunities traditional companies have.  This tax code section also makes it more difficult for social equity owners of cannabis companies to obtain the funding they need to maintain and expand their business.

You have written a book on cannabis taxation, a rather complex and fluid subject. Tell us more about this book project.

Thomson Reuters approached me around 2017 as legalization was ramping up and they were looking to create a compilation of state taxation rules for their clients (accountants and lawyers).  So, I collaborated with their staff, serving as editor, to build out this treatise on cannabis taxation from across the country whether medical or for adult use.  So, we touched upon every part of the supply chain including cultivation, manufacturing, distribution and even retail.  The book changes so frequently, you can’t even get a hardcover copy.  That just shows how fast this entire vertical is moving.  We started with some 15-20 states and roughly 2-3 new states get added each year as legalization spreads.

You seem to have some reservations about the eastward (east coast) expansion of the cannabis industry? What are some of your most pressing concerns?

Not at all.  I think the West Coast was the forerunner because so many western states have voter ballot initiatives, so major changes happen faster.  Back east, laws are exclusively the domain of legislatures where things move slower.  But, things are moving.  In fact, just as I left Texas for California – I’ve moved to the New York tri-state area as this market continues to expand.

Many of my western clients are expanding their brand to the East Coast as well.

I think the pressing concern remains the federal legalization of cannabis, which I believe will happen once a critical mass of states of legalize it.  When more than half of United States senators represent states where cannabis is legal, it becomes unnecessarily burdensome to retain the federal criminalization laws. It will happen and professional services firms will need to be ready to help companies get in compliance.

It also means that cannabis companies will have access to safe banking.  Right now, cannabis is a cash business, which creates all kinds of headaches for proper bookkeeping, accounting and audits.

What are your personal predictions for the global cannabis industry in 2022?

In 2022, I think it’s still a little early for things to happen.  But, in the next 3-5 years, I see an acceleration of cannabis legalization in Europe.  There’s going to be a domino effect once one or two European Union countries legalize cannabis.  Because of EU trade rules and laws, it’s simply going to be easier for everyone to follow suit.

Now, beyond geography I could see the proliferation of cannabis lounges and craft farms as a big part of the hospitality industry.  We’ll see them open at hotels and resorts, and people will plan weekend trips just as they do these days with wineries, craft breweries and craft distilleries.

From a medicinal perspective, we’ve gone from only one research university (University of Mississippi) making medical research cannabis available to dozens of universities making it available.  With legalization comes supply, and ultimately the ability for universities and life sciences companies conduct large-scale medical research on how cannabis can improve people’s lives from a health care perspective.

Women will make a larger portion of cannabis company owners and will bring to the market a  more feminine side to this industry that has long been dominated by male owners that have traditionally marketed high THC products for the 21-35 year old demographic.

We are just scratching the surface on the legal cannabis industry.

Thank you for the great interview and for all of the work that you have done to help move this industry forward, readers who wish to learn more should visit Armanino.





Lydia K. (Bsc. RN) is a cannabis writer, which, considering where you’re reading this, makes perfect sense. Currently, she is a regular writer for Mace Media. In the past, she has written for MyBud, RX Leaf & Dine Magazine (Canada), CBDShopy (UK) and Cannavalate & Pharmadiol (Australia). She is best known for writing epic news articles and medical pieces. Occasionally, she deviates from news and science and creates humorous articles. And boy doesn't she love that! She equally enjoys ice cream, as should all right-thinking people.

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