{"version":1,"type":"rich","provider_name":"Libsyn","provider_url":"https:\/\/www.libsyn.com","height":90,"width":600,"title":"High Growth, Higher Risk: The Business of Cannabis w\/ Melissa Diaz of Highrock Accounting - AZ TRT S07 EP07 (289) 4-12-2026","description":" High Growth, Higher Risk: The Business of Cannabis w\/ Melissa Diaz of Highrock Accounting - AZ TRT S07 EP07 (289) 4-12-2026       What We Learned This Week Cannabis Companies Are Taxed on Gross Margin Because of 280E, they can\u2019t deduct ordinary business expenses \u2014 creating massive tax burdens. Federal Classification Drives Everything Schedule I status impacts taxation, banking, regulation, and investor appetite. Many Companies Are Playing Legal Offense Some are challenging 280E aggressively, treating unpaid taxes as a strategic risk. Licensing Structure Determines Success Limited-license states create stronger economics. Unlimited states create margin compression. Consolidation Is Coming Stronger, vertically integrated, mid-sized operators are likely to dominate by 2026. Guest: Melissa Diaz https:\/\/www.highrock.co\/ https:\/\/www.linkedin.com\/in\/melissa-k-diaz-cpa-10215623\/ Melissa Diaz is a powerhouse at the intersection of accounting, strategy, and tech. As Co-Owner and CRO of High Rock Accounting (and co-founder of Rebel Rock PC, now High Rock), she leads with precision on everything from cash flow and budgeting to due diligence and audit readiness. At High Rock she helps businesses harness cutting-edge technology to make smarter, faster, fully compliant financial decisions both day-to-day and long-term. With an expertise in Cannabis and the Technology industry, Melissa\u2019s mission is clear: empower businesses to stay competitive, compliant, and efficient in high-pressure, high-growth environments. Whether she's solving complex reporting challenges or decoding 280E, Melissa brings charisma, clarity, and confidence to the table every time.       \ud83c\udf99 Podcast Notes Guest: Melissa DiazTopic: The Legal, Tax & Business Reality of the Cannabis Industry Segment 1: The Federal Tax Problem (280E) The Core Issue: Federal Classification The cannabis industry\u2019s biggest challenge isn\u2019t demand \u2014 it\u2019s federal law. Cannabis is still classified as a Schedule I controlled substance, meaning: \u00b7         No accepted medical use (federally) \u00b7         Same category as cocaine and methamphetamine Other classifications: \u00b7         Schedule II \u2013 Highly controlled with medical use (e.g., oxycodone) \u00b7         Schedule III \u2013 Lower control (e.g., Tylenol with codeine) \u00b7         Over-the-counter drugs are not controlled substances. Why This Matters: Section 280E Under Internal Revenue Code 280E: \u00b7         Cannabis businesses can only deduct Cost of Goods Sold (COGS). \u00b7         They cannot deduct normal operating expenses. \u00b7         This means they are effectively taxed on gross margin, not net income. Result: \u00b7         Extremely high effective tax rates. \u00b7         Cash flow pressure. \u00b7         Structural workarounds. Industry Workarounds To manage tax exposure, many cannabis companies: 1.    Use Cost Segregation o    Categorize as many expenses as possible under COGS. o    Rarely challenged aggressively. 2.    Create Management Companies o    A separate affiliated entity handles: \u00a7  Admin \u00a7  Marketing \u00a7  HR \u00a7  Operations o    Charges a management fee to the cannabis entity. o    Helps shift deductible expenses outside 280E limitations. Possible Federal Rescheduling If cannabis moves to Schedule III: \u00b7         Businesses could deduct ordinary expenses. \u00b7         Massive financial impact. \u00b7         Immediate improvement in profitability. Segment 2: Legal Challenges & Risk The Harborside Case \u00b7         Legal challenge against 280E application. \u00b7         Many companies have followed similar strategies using management entities. \u00b7         Ongoing uncertainty. Executive Order & Medical Cannabis \u00b7         Medical cannabis revenue represents 10\u201315% of total revenue. \u00b7         38 states allow legal medical or recreational cannabis. \u00b7         Federal inconsistency remains. Protective Filings If companies owe significant taxes (e.g., $10K+ unpaid liabilities): \u00b7         Protective filings can preserve rights. \u00b7         Strategic legal positioning matters. Big Question If the IRS loses major 280E challenges: \u00b7         Could owe interest refunds to companies. \u00b7         Significant fiscal impact. But there\u2019s always: \u00b7         Litigation risk \u00b7         Opportunity cost \u00b7         Cash flow strain during disputes Segment 3: State-Level Expansion & Industry Consolidation Florida Example \u00b7         Recreational legalization pushed in 2024 but failed. \u00b7         Multi-state operators (MSOs) heavily lobby for expansion. \u00b7         Example: Trulieve and other large operators. Tax Strategy Risk Some companies treat unpaid taxes as: \u00b7         A \u201cloan\u201d from the IRS \u00b7         Betting on favorable legal rulings But risk: \u00b7         Potential clawbacks \u00b7         Penalties and interest Many companies are aggressively challenging 280E. Segment 4: Regulation, Licensing & Industry Structure State Regulation Differences \u00b7         New Jersey & New England: Unified recreational frameworks. \u00b7         Unlimited license states = oversaturation. \u00b7         Limited license + lottery systems = high barriers to entry. Zoning Restrictions Dispensaries: \u00b7         Cannot operate near schools or churches. \u00b7         Subject to strict local zoning rules. \u00b7         \u201cVice-style\u201d regulation model. Vertical Integration Matters Very difficult to survive with just one vertical. Companies that control: \u00b7         Cultivation \u00b7         Processing \u00b7         Distribution \u00b7         Retail \u2026have stronger margins and operational control. Operational Reality \u00b7         No outdoor growing in high heat climates. \u00b7         Indoor, climate-controlled warehouses dominate. \u00b7         Highly regulated workforce (Facility Agent cards required). Financing Landscape \u00b7         Real estate lending \u00b7         Sale-leaseback arrangements \u00b7         Hard money loans (due to banking restrictions) 2026 Industry Predictions \u00b7         Large operators buying smaller failing companies (trend slowing). \u00b7         Growth of mid-sized operators: o    2 states \u2192 $20\u201350M revenue. o    3\u20135 states \u2192 $100M+ revenue. \u00b7         Continued consolidation. \u00b7         Ongoing regulatory and tax uncertainty. Melissa\u2019s Perspective: Being a service provider in cannabis means operating in constant uncertainty \u2014 but that\u2019s also where opportunity lives.     Cannabis 2025 in Review: Lessons Operators Can\u2019t Afford to Miss If your client or employer is a cannabis operator who made it through 2025, congratulations. They survived a year that separated the strategists from the dreamers, the operators from the opportunists, and the businesses built on solid fundamentals from those riding on hype alone.   This wasn't the year of explosive growth and easy money. This was the year the cannabis industry got real.   Let's break down what happened in 2025 beyond the headlines. More importantly, let\u2019s break down what it means for the cannabis industry and you.   Article Link: HERE     Cannabis Topic: https:\/\/brt-show.libsyn.com\/category\/Cannabis-Hemp-Marijuana   Tech Topic: https:\/\/brt-show.libsyn.com\/category\/Tech   Best of Biotech from AZ Bio & Life Sciences to Jellatech: HERE   Thanks for Listening Please Subscribe to the Podcast   AZ Tech Roundtable 2.0 with Matt Battaglia The show where Entrepreneurs, Top Executives, Founders, and Investors come to share insights about the future of business.  AZ TRT 2.0 looks at the new trends in business, & how classic industries are evolving.  Common Topics Discussed: Startups, Founders, Funds & Venture Capital, Business, Entrepreneurship, Biotech, Blockchain \/ Crypto, Executive Comp, Investing, Stocks, Real Estate + Alternative Investments, and more\u2026    AZ TRT Podcast Home Page: http:\/\/aztrtshow.com\/ \u2018Best Of\u2019 AZ TRT Podcast: Click Here Podcast on Google: Click Here Podcast on Spotify: Click Here                    More Info: https:\/\/www.economicknight.com\/azpodcast\/ KFNX Info: https:\/\/1100kfnx.com\/weekend-featured-shows\/   Disclaimer: The views and opinions expressed in this program are those of the Hosts, Guests and Speakers, and do not necessarily reflect the views or positions of any entities they represent (or affiliates, members, managers, employees or partners), or any Station, Podcast Platform, Website or Social Media that this show may air on. All information provided is for educational and entertainment purposes. Nothing said on this program should be considered advice or recommendations in: business, legal, real estate, crypto, tax accounting, investment, etc. Always seek the advice of a professional in all business ventures, including but not limited to: investments, tax, loans, legal, accounting, real estate, crypto, contracts, sales, marketing, other business arrangements, etc.   ","author_name":"AZ Tech Roundtable 2.0","author_url":"https:\/\/brt-show.libsyn.com\/","html":"