How to Allocate Facility Property Taxes
Allocating real estate property taxes for a cultivation facility into inventory as an indirect production cost.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Inventory - WIP - Cultivation | Asset | 2,500.00 | - |
| Accrued Property Taxes | Liability | - | 2,500.00 |
💡 Accountant's Note
For cultivation, property taxes are an indirect cost of production that must be capitalized into inventory costs rather than expensed immediately.
Practitioner & Systems Framework
💻 ERP Architecture
Calculate based on square footage of production areas versus office areas; record via recurring journal entry.
⚠️ Audit Flags
Directly expensing property taxes for cultivation facilities is a common error flagged under IRS Section 280E audits.
📄 Required Documentation
Property tax bill and a square footage allocation worksheet.
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Related Journal Entries
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IRC §280E — Complete Disallowance of Ordinary Business Expenses (Cannabis-Specific Tax Law)
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§471 Inventory Cost Capitalization — Maximizing COGS for Cultivators Under §280E
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Biological Assets — Growing Cannabis Plants at Fair Value (IAS 41 for Canadian Companies)
Discussion & Community Questions
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