OK….not the first time this topic has come up! 

But, after all, an election is near!

So, we thought it might be interesting to re-visit a few legislative issues that affect our industry.  Not just those of us that are involved in the industry, but also the public and consumers. After all, they are the driving force behind all of our efforts!

By now nearly everyone is aware of the main legislative problem that confronts the cannabis industry on a daily basis: continued federal classification as illegal.

“Hooray” for those States that have found a way to overcome local impediments. A list that we expect to grow significantly in the coming year. But the overhang from federal laws still impacts our industry at every level. So, while those of us in the industry understand the impact of the situation, HighBridge would like to share its view on how  a couple of Federal Laws directly affect the public and consumers.

The main problem that regulation & taxation promotes is cost. As with all businesses, the costs associated with running their enterprise is passed along to the consumer and is reflected in the price of goods at retail. Now, I think we all can agree that regulation and quality control are good things and protect our consumers. But consider how these laws and programs impact our industry, which ultimately are reflected in higher retail prices:

BANKING: Because the Federal system considers the Cannabis industry illegal, it presents a huge problem to the Banking industry. While the banks salivate thinking about the BILLIONS of dollars associated with the Marijuana industry, Revocation of FDIC membership, confiscation of funds, and a host of other regulatory “enforcement” options have basically lead the traditional banking industry to avoid “onboarding” of cannabis companies (that is the new term of art used to explain why we are not welcome at most banks!). This also extends to the usual bank card/credit card services. And, as with any problem, there are solutions available – but at a cost other industries do not incur. Most cannabis companies simply “hoard” the cash. Oh yes – CASH. There is still a huge resistance to the use of conventional credit cards and debit cards. The result is construction of large vaults (add to the cost), additional security (add to the cost), and, if you are able to find one of the few banks or credit unions willing to “onboard” your company, there are FEES attached that do not apply to other business accounts (add to the cost!). As an example, one of our colleagues pays 4% of the monthly deposits for this fee. In states where they operate and no banking is available, the cash is transported to its bank for an additional fee of 2% of the cash transported (add to the cost!). Starting to get the picture?

The Cannabis Trade Federation, the main lobbying group for our industry, has testified before Congress and helped shepherd the S.A.F.E. Banking act through the House of Representatives for the THIRD time!  This would offer relief to our industry and allow conventional banking, at least in those states with legal marijuana.  But it is on hold again, apparently, until after the upcoming election.  

TAXES.  This could be the single biggest issue confronting the cannabis industry. Because cannabis is considered illegal by the federal government, conventional tax laws do not apply. Thus, we are not permitted by the IRS to deduct from income the cost of goods sold or the costs of production. In essence, our gross revenue becomes our net taxable revenue. Unfair? Yes. Punitive? Of course.

This sometimes results in taxation of cannabis companies that is several times higher than that incurred by others (again, add to the cost and subsequent price you see at retail!).  And, it could even get worse! “Marijuana Moment” recently published this tidbit: 

The Internal Revenue Service is building special audit teams focused on enforcing marijuana industry tax compliance.

Unfortunately the only relief on the horizon for this dilemma is the federal legalization of marijuana. 

The cumulative, collateral effect is that the pricing disparity allows Black Market marijuana dealers to continue to take a huge bite out of the retail market, with unregulated, non-traceable product and virtually no quality control.  

There’s more! But by now you get the picture. The cannabis industry needs your help. PLEASE contact your state and federal representatives and urge them to support Cannabis Reform. Then, most importantly:

GO VOTE!

Until that time,

Your friends at HighBridge Premium Cannabis

 

Featured Image: Photo by Parker Johnson on Unsplash