What a cannabis business seller actually nets: worked examples

Brokerage deals are confidential, so this page uses composite examples rather than real transactions. Each one traces a hypothetical sale from the headline price to the cash that reaches the seller at closing, then to total cash after escrow releases, note payments and tax. Every figure marked as an assumption is invented for illustration; the rules and published fees behind each line are sourced. This is education, not tax or legal advice.

Assumptions used in all three examples

These apply unless an example says otherwise.

Line item	Assumption	Basis
Broker success fee	Double Lehman scale on the full price, paid at closing	Published general-market structures in cannabis broker fees and commission; flat 8% to 12% is common under $1 million. Not any firm’s rate.
Legal and accounting	$50,000 to $110,000 legal; $20,000 to $35,000 accounting, by deal size	A mid-market guide reports flat legal fees typically beginning at $30,000 and accountant fees from $10,000; regulatory filings add cost in cannabis
Indemnity escrow	5% to 10% of price, 12 to 18 months	SRS Acquiom reports a median 12-month survival period and frequent separate tax escrows
Long-term capital gain	20% federal rate	Top bracket for 2025 per IRS Topic 409
Ordinary income	37% federal rate	Top 2025 rate per the IRS rate table
State income tax	The state’s 2026 top rate, applied flat	Tax Foundation, 2026
Seller’s basis in goodwill and licence	Zero	Typical for a founder-built business
Selling expenses	Deducted from the capital gain	Simplification; your CPA will allocate them

Tax figures are rounded to the nearest $100. Income from operations up to the closing date, and the tax on it, is left out.

Example 1: single adult-use dispensary, asset sale with a seller note

Illustrative example — a hypothetical composite, not a client transaction.

An owner-operator sells an Illinois adult-use dispensary for $3,000,000 as an asset purchase, with the licence transferring on regulator approval. The buyer pays $2,100,000 at closing and the seller carries a $900,000 note at 8% over five years, with equal principal payments (assumptions). Illinois charges $5,000 per adult-use licence on a change of ownership; here the seller agreed to pay it. The inventory target was $120,000 and the closing count came in at $100,000.

Step	Amount
Headline price	$3,000,000
Less seller note carried	(900,000)
Cash due at closing	2,100,000
Less broker fee, Double Lehman on $3,000,000	(240,000)
Less legal fees (assumption)	(75,000)
Less accounting and tax work (assumption)	(25,000)
Less Illinois change-of-ownership fee	(5,000)
Less equipment loan payoff (assumption)	(60,000)
Less inventory true-up, $100,000 counted against $120,000 target	(20,000)
Less indemnity escrow, 8% for 18 months (assumption)	(240,000)
Cash at closing	$1,435,000
Plus escrow released in full at month 18 (assumption)	240,000
Plus note principal over five years	900,000
Plus note interest: 72,000 + 57,600 + 43,200 + 28,800 + 14,400	216,000
Total pre-tax cash	2,791,000
Less federal tax on gain (see below)	(519,500)
Less Illinois tax at 4.95% on $2,385,000 gain	(118,100)
Less federal and state tax on note interest, 41.95% of $216,000	(90,600)
After-tax cash over time	$2,062,800

The gain: price net of the true-up is $2,980,000. Inventory is allocated $100,000 at cost, so no gain. Equipment is allocated $400,000 against a $150,000 adjusted basis; the $250,000 gain is less than depreciation claimed, so all of it is ordinary income under section 1245, taxed at 37% for $92,500. Goodwill and licence value of $2,480,000, less $345,000 of selling expenses, gives a $2,135,000 capital gain, taxed at 20% for $427,000. The owner works in the business, so the net investment income tax is assumed not to apply.

What drove the result. Cash at closing was 48% of price because 30% was carried on a note and 8% sat in escrow. The note deferred tax on the goodwill gain under the installment method, but section 453(i) required the $92,500 recapture tax for the year of sale. After-tax cash reached 69% of price only because the note was paid in full; see seller financing in cannabis deals for how notes are secured.

Example 2: vertically integrated operator, membership-interest sale

Illustrative example — a hypothetical composite, not a client transaction.

The owners of a vertically integrated Delaware operator with medical and adult-use sales sell 100% of the LLC’s membership interests for $5,000,000 cash, debt-free. Delaware charges $5,000 or 15% of the transaction value, whichever is higher, for a change of ownership: $750,000 here. The letter of intent split it equally (assumption). Because the business has both medical and adult-use activity, 2026 needs an apportionment of expenses under 280E that federal guidance has not yet set out, so the buyer took a separate tax escrow. The working-capital peg was $400,000 and closing working capital was $350,000.

Step	Amount
Headline price	$5,000,000
Less private credit loan payoff, including prepayment premium (assumption)	(600,000)
Less seller’s half of the $750,000 Delaware fee	(375,000)
Less broker fee, Double Lehman on $5,000,000	(300,000)
Less legal fees (assumption)	(110,000)
Less accounting and tax work (assumption)	(35,000)
Less working-capital true-up, $350,000 against a $400,000 peg	(50,000)
Less indemnity escrow, 10% for 18 months (assumption)	(500,000)
Less special tax escrow for the 2026 apportionment, 36 months (assumption)	(150,000)
Cash at closing	$2,880,000
Plus indemnity escrow released after one $100,000 claim (assumption)	400,000
Plus tax escrow released in full (assumption)	150,000
Total pre-tax cash	3,430,000
Less federal tax on gain (see below)	(697,000)
Less Delaware tax at 6.6% on $3,230,000 gain	(213,200)
After-tax cash over time	$2,519,800

The gain: $5,000,000, less the $50,000 true-up and the $100,000 escrow claim, less $820,000 of selling expenses (broker, legal, accounting and the seller’s half of the state fee), less an assumed $800,000 basis in the membership interests, equals $3,230,000. Partnership rules treat the share tied to inventory and depreciation recapture as ordinary; assume $300,000, taxed at 37% for $111,000. The remaining $2,930,000 at 20% is $586,000.

What drove the result. The state fee alone cost the seller 7.5% of price, more than the broker. Under section 1411(c)(4), gain on a partnership interest is net investment income only to the extent it would be if the entity sold its assets, so active owners here avoided the 3.8% tax. By contrast, New Jersey’s fee for a majority transfer is a flat $20,000. The structural trade-offs are in asset sale vs membership-interest sale.

Example 3: store with tax arrears and a lender payoff

Illustrative example — a hypothetical composite, not a client transaction.

A Michigan adult-use store sells its assets for $1,800,000 cash. The owner hired a general manager years ago and no longer materially participates, so gain is passive (assumption). The business owes state sales and excise tax, a federal payroll-tax lien, and local fees. Michigan can make a buyer personally liable for a seller’s unpaid taxes unless it withholds or gets clearance, as covered in selling with tax delinquency, so all of it is paid from proceeds. The inventory target was $200,000 and the count came in at $215,000.

Step	Amount
Headline price	$1,800,000
Plus inventory true-up, $215,000 counted against $200,000 target	15,000
Less broker fee, Double Lehman on $1,800,000	(164,000)
Less legal fees (assumption)	(50,000)
Less accounting, including amended returns (assumption)	(20,000)
Less private lender payoff, principal plus interest and exit fee (assumption)	(375,000)
Less state sales and excise tax arrears, with penalties (assumption)	(140,000)
Less federal payroll-tax lien payoff (assumption)	(60,000)
Less local fee and tax arrears (assumption)	(30,000)
Less special tax escrow for an open state audit period (assumption)	(90,000)
Less indemnity escrow, 5% for 12 months (assumption)	(90,000)
Cash at closing	$796,000
Plus tax escrow released after a $40,000 assessment (assumption)	50,000
Plus indemnity escrow released in full (assumption)	90,000
Total pre-tax cash	936,000
Less federal tax on gain (see below)	(338,400)
Less Michigan tax at 4.25% on $1,336,000 gain	(56,800)
After-tax cash over time	$540,800

The gain: price plus true-up is $1,815,000. Inventory at $215,000 cost produces no gain. Equipment allocated $150,000 against a $30,000 basis gives $120,000 of section 1245 recapture, taxed at 37% for $44,400. Goodwill of $1,450,000, less $234,000 of selling expenses, is a $1,216,000 capital gain, taxed at 20% for $243,200. As a passive owner, the seller also owes the 3.8% net investment income tax on the full $1,336,000: $50,800.

What drove the result. Debt and tax arrears took $605,000 of cash but reduced the taxable gain by nothing, which is why tax consumed 42% of pre-tax cash. Passive status added $50,800. Settling arrears before going to market shrinks the audit escrow and gives the buyer less to discount.

How each line item is set

• Broker fee. A percentage of price at closing. Negotiate whether the fee on a note or earn-out is paid only as you receive it.
• Legal and accounting. Cannabis adds regulatory filings, local approvals and often a clean-up of 280E returns.
• State transfer fee. Ranges from Illinois at $5,000 per licence to Delaware’s 15% of value. Who pays belongs in the letter of intent; see change of ownership approval explained.
• Lender and lien payoffs. Paid through the closing agent against payoff letters and releases. They reduce cash, not gain.
• Tax clearance and successor-liability holdbacks. Buyers withhold or escrow until state clearance arrives; sizing is covered in tax liabilities and holdbacks in a sale.
• Indemnity escrow. Size, survival and release terms follow the reps; see reps, warranties, and compliance indemnities.
• Inventory and working-capital true-ups. Can move either way; methods are in inventory and biomass at closing.
• Federal tax. Long-term gain on assets held over a year at 0%, 15% or 20%; recapture at ordinary rates; net investment income tax of 3.8% above $200,000 single or $250,000 joint modified AGI, but generally not on gain from a business in which you materially participate.
• Installment sale. A note defers tax on the capital gain until principal is received, but recapture and inventory do not qualify under section 453.
• State income tax. Top 2026 rates run from zero in eight states to 13.3% in California, per the Tax Foundation.
• 280E. It does not tax the gain itself. It lowers the price, raises final-year tax and creates arrears. The full treatment is in taxes when selling a cannabis business.

Numbers every seller should have before going to market

Figure	Why it matters	Where to go deeper
Normalized EBITDA, before and after 280E	What buyers price	Financial statements under 280E
Payoff letters for every loan, with prepayment terms	First claim on proceeds	Seller financing
Federal, state and local tax account transcripts	Reveals liens and holdbacks	Tax liabilities and holdbacks
Your state’s transfer fee and timing	Can exceed the broker fee	Change of ownership approval
Lease assignment terms, landlord consent fee, remaining term	Buyers price a short or unassignable lease hard	Landlord consent and lease clauses
Fixed-asset register with accumulated depreciation	Sizes recapture	Taxes when selling
Basis in your shares or membership interest	Sizes the capital gain	Your CPA
Normal inventory and working-capital level	Sets the peg	Inventory at closing
Your material-participation status	Decides the 3.8% tax	Your CPA
Minimum after-tax cash you need	Your walk-away number	Book a call

Build your own version of these tables with real payoff letters before you sign a letter of intent. The headline price is the number buyers compete on; the bottom line is the number you live on.