Curaleaf And Trulieve Lead The Pack In Tax Payments: A Look At 16 Cannabis MSOs' Liability, Income And More

How are major players in the cannabis sector handling their tax obligations, and what does it reveal about their financial strategies?

A recent equity report by Zuanic & Associates sheds light on the tax payments and liabilities of 16 Multi-State Operators (MSOs) in the industry during CY22.

The findings expose a wide range of approaches, sparking questions about accounting practices and the use of tax debts as a funding source.

Key Findings And Top Contributors

According to the report, the 16 MSOs reviewed collectively paid a staggering $761 million in income taxes in CY22. The report highlights that payments as a percentage of gross profits can vary significantly among MSOs. Ideally, the statutory rate for income taxes on gross profits should be in the low to mid-20s for most companies.

• Curaleaf CURLF and Trulieve TCNNF emerged as the top contributors, with $156 million and $147 million in tax payments, respectively.
• The three largest MSOs, including Green Thumb GTBIF, accounted for a substantial 55% share of the total income taxes paid within the group during the period.
• Acreage ACRHF and Ascend reported ratios in the low to mid-30s, while Columbia Care CCHWF, Curaleaf, Green Thumb, MariMed MRMD and Trulieve fell within the low to mid-20s.
• Planet 13 PLNHF, Schwazze SHWZ and Verano VRNOF showed ratios in the mid to high teens, while TerrAscend TRSSF, Cresco CRLBF and Jushi JUSHF were in the 10-12% range.
• 4Front FFNTF was an outlier with just 5%, while Tilt TLLTF, being exempt from 280E due to its hardware accessories business, reported 1%.

Income Tax Puzzle

The report raises questions about the reasons behind the varying income tax to gross profit ratios. It suggests that accounting and deferred tax issues might play a role. However, it also might be that some companies are utilizing tax debts as a low-cost funding source.

• The data showed that 4Front and Verano had the highest income tax liabilities as a percentage of gross profits, at 89% and 60%, respectively.
• Several other MSOs, including Acreage, Ascend, AYR AYRWF, Cresco, Curaleaf, Jushi, and TerrAscend, were in their 20s.
• In contrast, Green Thumb and Tilt reported single-digit figures of 1% and 3%, respectively.
• The report also examines the relevance of income tax paid to sales ratios, taking into account various gross margins across MSOs.
• Companies with higher gross margins, such as Green Thumb, Schwazze, and Trulieve may have a different approach to tax liabilities compared to those with lower gross margins.

“The income tax paid (or ST tax debt) to sales ratio may be less relevant given various levels of gross margins across MSOs: In CY22, only three MSOs had gross margins of 50% or higher (Green Thumb, Schwazze, Trulieve),” per the report. Meanwhile, MSOs like Ascend, Columbia Care, 4Front, Jushi, and Tilt had gross margins below 40%.

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Photo: Miha Creative and Branding Pot on Shutterstock.