November 15, 2018

Bags of Cash and Stealthy Deliveries: How Pot Start-Ups Pay Taxes

The federal government has a history of taking a hard-line view of this industry. In 2015, the Federal Reserve Bank of Kansas City likened Colorado’s legalization of marijuana to allowing “trade in endangered species or trade with North Korea.”

But that hard-line is beginning to change, which could mean that down the road, federal regulations might loosen up.

Senator Chuck Schumer, Democrat of New York, said last month that he would introduce a bill decriminalizing cannabis. And President Trump recently suggested that he would be open to signing a law that would allow states to control their cannabis industries without threat of federal prosecution. A business group, the National Cannabis Industry Association, recently produced a video encouraging citizens to ask Congress to “support legal small businesses that are successfully replacing the criminal marijuana market.” More than 200 of its members will visit Washington starting Monday to lobby Congress on issues including banking and taxes.

John Boehner, the former speaker of the House who had been one of the most staunch opponents of legal marijuana, said his views have changed. He recently joined the advisory board of Acreage Holdings, an investment firm dedicated to the cannabis industry. Bill Weld, the former Republican governor of Massachusetts who also has joined the Acreage advisory board, said he believed cannabis could help wean people off opioids.

Shutting off access to the federal banking system presents a variety of risks, said Peter Conti-Brown, an assistant professor of legal studies and business ethics at the University of Pennsylvania’s Wharton School. The chance of income being underreported increases, he said, as does the chance of employee theft or even armed robbery as large amounts of cash move through the business ecosystem.

“Marijuana businesses and banks are caught in the crossfire,” Mr. Conti-Brown said.

Some credit unions and small banks that are chartered by their state, not the federal government, have tried to fill the void by offering basic banking services to the cannabis industry. George Allen, president of Acreage Holdings, said the companies he has invested in have been able to find banking in the 11 states where they operate, which has, among other things, allowed them to pay taxes electronically or by check.

Tai Cheng, the chief operating officer for Aloha Green Apothecary in Hawaii, a state where marijuana is legal for medicinal purposes, runs his company almost completely in cash.

Article source: https://www.nytimes.com/2018/05/18/business/smallbusiness/marijuana-companies-federal-taxes.html?partner=rss&emc=rss

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