The cannabis industry and cannabis business owners do face problems with securing dedicated banking services, even though; cannabis has been legalized in those states. Due to the Schedule 1 Dangerous Drug Act that is still a part of the laws governing the federal government, many banks are reluctant to engage in doing business with cannabis business owners. In other words, there is no banking system or service that is legal. If banks that are federally chartered are caught providing services to cannabis business owners, it could result in money laundering charges.
This has resulted in daily operations for cannabis business owners. For many in the cannabis industry, this does not make sense since in 2016 alone; the industry profited $7 million from cannabis sales. Even in 2018, the feds make it hard to track business transaction and forces cannabis business owners to collect using cash instead of credit. It has become quite a hassle for those who rely on cannabis as income and profit. In addition, it makes it easier for cannabis business owners to be robbed since they keep so much cash on hand and have nowhere to bank the money collected. Let’s look at the cash issues.
Problems with Cash
Another problem that cannabis business owners might run into is paying their employees and having no other way for customers to pay, but by cash. It takes more employees to finish the ordinary sales transactions as well as payroll responsibilities. The banks do not have many financial options for people who choose to do business in the cannabis industry, especially since the industry is deemed to be risky according to the feds.
The problem cannot be resolved unless cannabis business owners look to the banking side of things instead of the business side. The restricted regulations are what make it difficult for banks to do business in the cannabis industry. The banking regulations instituted by the feds not only harms the cannabis industry, but other industries as well. However, the cannabis industry suffers the most due to the intricacies of the federal law.
In 2014, the Treasury Department announced its clear guidelines on exactly what the banking system can do and the 2013 Cole Memo introduced by the Justice Department also presented their own guidelines to banking institutions, indicating the items of compliance for cannabis business owners. However, everything is so complex and banks are required to report suspicious activities, which allows the feds the chance to raid a cannabis dispensary, for example, that has sales of over a million dollars without embracing the fact that this is possible. Many advocates think that this specific guideline is unnecessary for the cannabis business owners and their operation. There are banking institutions that do offer services to the cannabis industry, but they are less than thirty of them in the entire United States. In the meantime, there are no credit card companies that offer payment processing services to cannabis business owners.
Another financial woe for cannabis business owners is taxes. Some companies have to pay their sales taxes by taking the cash to a secure location each month. The transporting of cash could be very risky and insecure. In addition, using cash to pay taxes might mean that business owners don’t file the proper paperwork, which will eventually trigger an IRS audit. For the cannabis business owners, it is going to be important to exclude expenses directly related to making cannabis products and cost of goods sold. If you are unsure of what you should deduct, it is wise to have a tax professional advise you.
Although there are banking solutions available for cannabis business owners, there is certainly a long way to go in dealing with various banking issues caused by federal regulations and laws.