Post date: 1/25/2023

Did you know that cannabis-related businesses (CRBs) – like vape manufacturing and production companies – are eligible to retroactively receive a very lucrative tax credit? It’s true – and many CRBs aren’t aware that they’re eligible to receive these funds.  

If you’re a cannabis business owner in the vape industry, you may be eligible for the Employee Retention Credit (ERC), worth up to $26,000 per employee. This credit offers qualified cannabis businesses a tax break for employee retention. In this article, you’ll learn how to determine if you qualify for ERC credit, and if so – how you can claim it this tax season.

What Is The Employee Retention Credit (ERC)?

The Employee Retention Tax Credit (ERC or ERTC) was created in 2020 under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Originally created to encourage tax-exempt organizations and businesses in the private sector to keep their employees on the payroll during the 2020 COVID-19 mandatory business shutdowns. In 2020, the ERC was only available to organizations that didn’t receive a Paycheck Protection Program (PPP) loan


Why Can Cannabis Companies Claim ERC Credit Now?

Cannabis companies were originally prohibited from most economic recovery packages. In December 2020, the Consolidated Appropriations Act was approved retroactively, removing restrictions to claiming the ERC for businesses that had received a PPP loan. In 2021, the credit was expanded again, this time to retroactively apply to many businesses who were originally excluded from receiving the benefit. For the 2022 tax year, with no active PPP loans, the rules and regulations have changed. Meaning many CRBs can retroactively claim the ERC. 

However, the ERC credit has only been claimed by a small percentage of the cannabis industry. Because most cannabis businesses were excluded from both PPP loans and the ERC, most assume their prior ineligibility disqualifies them from receiving ERC tax relief. Your vape business could be qualified to receive these funds, and you could be leaving money on the table by not applying.  

How Is ERC Credit Calculated?

Issued as a refund of the employer’s IRS Form 941, ERC credit is an incentive for employers who suffered financial losses due to pandemic-related disruptions and decreased revenues. ERC credit applies to wages from March 13, 2020 through December 31, 2021. ERC credit can also be claimed retroactively on qualified health costs paid out to employees. ERC credit refunds are typically calculated as the equivalent of 50-70% of qualified employee wages. Businesses employing fewer than 500 employees must meet additional conditions for the 2020 – 2021 years. The minimum ERC credit averages $5,000, with a maximum payout of  $10,000 per employee per calendar quarter in 2021. 

ERC Can Provide Up To a $26,000 Refund Per Employee

ERC credit is retroactively applicable to many CRBs who were previously excluded from receiving the benefit, who kept their cannabis employees on the payroll through the 2020-21 shutdowns. The ERC Program operates on money that’s already been paid to the IRS in payroll taxes for W2 employees. ERC credit is calculated based on the number of W2 employees your vape business had on its payroll in the 2020 and 2021 tax years. Depending on your vape business’s eligibility, you could qualify to receive up to $26,000 per employee. 

How To Qualify For ERC Credit

In order to qualify for the employee retention credit, you must be an “eligible employer,” operating a vape business or other licensed CRB that experienced either a full or partial suspension of operations due to government orders related to COVID-19 in 2020-21 . 

Additionally, vape businesses with more than 100 full-time employees are only eligible if they have experienced some degree of workforce reductions. Vape businesses with fewer than 100 full-time employees are eligible no matter the size of their workforce reductions. To be eligible for the full ERC credit, your vape business must have paid wages to the employee, whether they worked or not. 

ERC Qualification Criteria For Vape Businesses

Examples of qualifying criteria for cannabis vape businesses to receive ERC credit qualification include, but are not limited to:

  • Capacity limits on the number of customers in waiting and/or service areas
  • Limitation of sales of pre-packaged goods
  • Orders prohibiting customers from being able to smell cannabis products for purchase
  • Orders allowing only curbside transactions
  • Mandated, time-consuming disinfection procedures

Cutting Edge Solutions For Your Industry

Your cannabis vape company needs a way to adapt to quick industry growth and create cutting edge, easily-integrated risk management protocols. With Paybotic’s full suite of cannabis FinTech banking solutions, it’s easier and faster to provide continuous, compliant risk management for your business – without the added stress. 

It’s easier to track and monitor cash flow in and out of your business and reduce the amount of cash in your store with Paybotic’s secure payment processing via ACH/debit, digital wallet, eCheck, and gift cards. Real-time reporting and inventory monitoring makes it easier to identify financial irregularities and address them before they become threats.

Paybotic Can Help Your Vape Business Claim ERC Credit

Understanding the ins and outs of ERC credit can be complicated, but with the right help you can make sure that your vape business takes advantage of this tax break. Paybotic pros help ensure that your business gets the maximum ERC credit to which you’re entitled. With Paybotic’s assistance, you’ll learn more about the employee retention credit and how it could benefit your vape business. Our financial experts can then help you figure out if your business is eligible for ERC credit, how much credit you can claim, and assist you in filing the appropriate paperwork.

In order to claim ERC credit on your taxes this year, contact the Paybotic professionals today!  

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