The Reality of the Marijuana Industry
On January 1, 2018 the nation’s largest source of marijuana economy, California, will legalize marijuana for recreational use. While many current and future dispensary owners are excited about the new legislation, there is a significant road block to creating a fully functional business – lack of financial support. Lack of financial support isn’t a reference to revenue, attracting consumers isn’t a problem, but lack of financial support from banks is. Many banks around the nation are hesitant to support businesses that are still illegal under federal law, which leaves many dispensaries with more cash than they can handle.
Take a grocery store for example; monthly taxes can be paid by simply sending a check or wiring over the money electronically. Since many dispensaries are barred from using banks, they have to deliver their monthly taxes to City Hall in cash. This can create problems if you run a successful dispensary like Jerred Kiloh of Los Angeles. Jerred explains his last payment was over $40,000, all delivered in cash. The financial department at L.A. City Hall reports cash payments of up to $300,000 from marijuana businesses.
Carrying around significant amounts of cash creates a stress filled trip during which business owners are constantly concerned about being robbed. Business owners aren’t the only parties concerned about the situation. The state expects to collect over $1 billion in new tax revenue annually from the marijuana industry within a few years of legalization. The absence of a secure, functional system to pay taxes will inevitably result in the state missing out on some of that money. With no bank records, it will be difficult to identify suspect operations. Those who operate their business by the book will be undercut by those who don’t. Without access to banks, everyone loses.