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Run the Payroll Fee Auditor →Blog · Payroll Management · Cannabis
Cannabis Businesses: Payroll Compliance Guide (2026)
Payroll compliance for cannabis businesses rests on the federal rules that reach this industry specifically, 3 of which are cited on this page, plus the deposit and filing duties every employer carries. BEG runs cannabis business payroll for $45 per employee per month inside the payroll software you already use, all-inclusive, live in 3 to 5 business days.
The rules that reach cannabis businesses specifically
The FLSA overtime exemption for agriculture applies only to work within the Act's definition of agriculture, which includes the cultivation, growing and harvesting of agricultural or horticultural commodities. Employees whose jobs relate to agriculture but fall outside that definition, such as packing commodities produced on a different farm, must be paid overtime, and agricultural employees must still receive at least the federal minimum wage.
An employee who customarily and regularly receives more than $30 a month in tips is a tipped employee under the FLSA. An employer may pay a cash wage of at least $2.13 per hour and take a tip credit of up to $5.12 per hour toward the $7.25 minimum wage, must give the employee notice before taking the credit, and may never keep any portion of employee tips.
The FLSA requires no particular form for payroll records, but for each non-exempt employee the employer must record hours worked each day and each workweek, the basis on which wages are paid, total wages paid each pay period, and the date of payment and pay period covered. Payroll records must be preserved for at least three years and time cards for two years.
The duties every employer carries
Federal income tax withholding, Social Security and Medicare, FUTA, deposits on the monthly or semiweekly schedule the lookback period sets, quarterly Form 941, annual W-2s and, for cannabis businesses paying contractors, 1099-NEC at the $2,000 threshold in force for tax years after 2025. A late deposit starts at a 2 percent failure-to-deposit penalty and climbs to 15 percent.
California cannabis licensees must keep personnel records showing each employee's full name, Social Security number or ITIN, date employment began and date of termination, plus training records listing the content and the employees trained, for at least seven years from the date of creation, in a form that can be produced to the Department of Cannabis Control on request.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- The FLSA overtime exemption for agriculture applies only to work within the Act's definition of agriculture, which includes the cultivation, growing and harvesting of agricultural or horticultural commodities. Employees whose jobs relate to agriculture but fall outside that definition, such as packing commodities produced on a different farm, must be paid overtime, and agricultural employees must still receive at least the federal minimum wage. [DOL Fact Sheet #12]
- An employee who customarily and regularly receives more than $30 a month in tips is a tipped employee under the FLSA. An employer may pay a cash wage of at least $2.13 per hour and take a tip credit of up to $5.12 per hour toward the $7.25 minimum wage, must give the employee notice before taking the credit, and may never keep any portion of employee tips. [DOL Fact Sheet #15]
- The FLSA requires no particular form for payroll records, but for each non-exempt employee the employer must record hours worked each day and each workweek, the basis on which wages are paid, total wages paid each pay period, and the date of payment and pay period covered. Payroll records must be preserved for at least three years and time cards for two years. [DOL Fact Sheet #21]
- California cannabis licensees must keep personnel records showing each employee's full name, Social Security number or ITIN, date employment began and date of termination, plus training records listing the content and the employees trained, for at least seven years from the date of creation, in a form that can be produced to the Department of Cannabis Control on request. [California Department of Cannabis Control regulations, section 15037 (revised July 1, 2026)]
Read the full guide to the payroll compliance library, and the rest of the cannabis business payroll library.
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Frequently Asked Questions
Cannabis business compliance: DOL Fact Sheet #12
The FLSA overtime exemption for agriculture applies only to work within the Act's definition of agriculture, which includes the cultivation, growing and harvesting of agricultural or horticultural commodities. Employees whose jobs relate to agriculture but fall outside that definition, such as packing commodities produced on a different farm, must be paid overtime, and agricultural employees must still receive at least the federal minimum wage.
Cannabis business compliance: DOL Fact Sheet #15
An employee who customarily and regularly receives more than $30 a month in tips is a tipped employee under the FLSA. An employer may pay a cash wage of at least $2.13 per hour and take a tip credit of up to $5.12 per hour toward the $7.25 minimum wage, must give the employee notice before taking the credit, and may never keep any portion of employee tips.
Cannabis business compliance: DOL Fact Sheet #21
The FLSA requires no particular form for payroll records, but for each non-exempt employee the employer must record hours worked each day and each workweek, the basis on which wages are paid, total wages paid each pay period, and the date of payment and pay period covered. Payroll records must be preserved for at least three years and time cards for two years.
What does managed payroll cost for a cannabis business?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. 280E tax code payroll deductions, cash payroll documentation and state cannabis board reporting are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Cannabis Businesses. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: U.S. Department of Labor: Wage and Hour Division
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