where does the money go?: how to deal with money in the marijuana industry
TRANSCRIPT
Where Does the Money Go? How to Deal
with Money in the Marijuana Industry
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Introduction
Imagine you’re running a small, local, grocery store. You have your customers, your employees, your suppliers, etc.
Now, at the end of the day you balance your till, lock the doors behind you, and quite literally hide your earnings under your mattress.
Sounds crazy right? This is the reality that marijuana dispensary owners face every day.
Introduction
Because banks are federally regulated and marijuana remains illegal under federal law, banks are wary of working with marijuana-related businesses.
It’s estimated that 70% of dispensary owners do not have a bank account, leading all of them to run a completely cash business.
So, exactly how do you run a business without a bank?
The Guidelines and the Worries
During 2014, the Obama administration issued guidelines allowing banks to serve legal, marijuana-related businesses.
But, even with these guidelines in place, banks are choosing not to take the risk or front the money to be in compliance.
The Guidelines and the Worries
Rob Rowe, Vice President and Associate Chief Counsel of Regulatory Compliance for the American Bankers Association says, “…banking a marijuana business is risky.”
Why Do They Need Access to Banks?
Creating a brick-and-mortar startup has its roadblocks, even in the most favorable conditions.
So, imagine starting a company with no business loans, no line of credit, no payroll system?
That’s right, it’s all cash.
And cash is not easy and, surprisingly, not cheap.
On top of paying employees, vendors, and bills in cash, retaining highly-skilled bookkeepers and accountants, you still need a physical area to KEEP your cash.
Why Do They Need Access to Banks?
With the having a cash-based business comes another problem – robberies.
Dave Ross, Resident of MMJ America, runs eight successful stores that can sometimes bring in “hundreds of thousands of dollars in cash” a month.
The risk of robbery with Dave and other marijuana business owners is a real issue.
Why Do They Need Access to Banks?
The Denver PD have logged over 200 burglaries at marijuana businesses.
So, the question is, do you use your resources to hire security when that money can go toward improving your product?
Why Do They Need Access to Banks?
Where Do The Taxes Go?
Though obtaining a bank account is a next to impossible task, states are more than willing to reap the tax benefits of legal marijuana sales.
So, where does the money go?
Where Do The Taxes Go?
The answer is, well, it’s complicated.
For simplification purposes, let’s take a look at Colorado.
In 2016, marijuana sales reached $1.3 Billion with $19.8 Million in tax revenue.
Colorado’s Industry
An easy breakdown for the most-talked about funds:
➢$40MIL goes to the BEST (Building Excellent Schools Today fund), going towards renovating and replacing public schools
➢Around $18 million went to the Department of Public Health and Environment to fund various programs, including $6.7 million to substance abuse prevention grants
Colorado’s Industry
➢$3MIL to the Department of Agriculture
➢$1MIL to the Attorney General’s office
➢$8.4MIL to the Department of Education for various programs, half of which going to Early Literacy Competitive Grant Program
➢$216,944 to the Governor’s Office, most of which funded the Office of Marijuana Coordination
Conclusion
Are you a legal marijuana business owner having banking issues?
We’d love to get your take on the marijuana banking crisis.
