CANNAINVESTOR Magazine December / January 2016 - Page 107

What is DPGR (Domestic Production Gross Receipts)?

Cannabis retailers, extractors, manufacturers would calculate DPGR as the sum of your gross receipts from the following activities:

1. Certain construction of real property that was performed in the United States in your construction trade or business (wouldn't it make sense to set up a separate LLC to build your green house, dispensary, or cultivation facility to offset any taxable revenue?)

2. Engineering or architectural services performed in the United States in your engineering or architectural services trade or business for the construction of real property in the United States. (Possibly form an LLC for the design of your facility, and utilize the deduction that way - the LLC hires the architect, etc., and bills it to the dispensary).

3. The lease, rental, license, sale, exchange, or other disposition of any of the following:

4. Qualifying production property you manufacture, produce, grow or extract in whole or in significant part in the United States (extraction is the key - it might make sense to create a separate company for extractors who are also producers).

5. Any qualified film you produce, or (this is part of the tax code, probably not applicable to any of us).

6. Electricity, natural gas, or potable water you produced in the United States (Why not put solar panels on your roof, sell yourself the electricity, and take the 9% right off the top?)

Your DPGR does not include income derived from:

A. The sale of food and beverages you prepared at a retail establishment;

B. Property you leased, licensed, or rented for use by any related person;

C. The transmission or distribution of electricity, natural gas, or potable water; or

D. The lease, rental, license sale, exchange, or other disposition of land.

It is a little complicated, but it will save you some serious money if applied correctly.

Go to https://www.irs.gov/pub/irs-pdf/i8903.pdf for the tax form and instructions on taking the deduction. Talk to your accountant or tax lawyer about it, and see if it can be fit into your system before the end of the year.

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