The federal prohibition of cannabis creates many problems for those who work in state-legal cannabis industries around the country, whether they are part of a medical or adult use market. One of the biggest problems affecting all cannabis businesses is a lack of banking services – less than 30% of all businesses working in the legal marijuana industry are actually able to obtain a bank account of any kind – which leaves the majority of the industry dealing in cash only.
Since the IRS is required to take any form of legal tender, this generally means that come tax time, they are sifting their way through extremely large sums of cash from these businesses. In the past, not as many medical cannabis businesses would file taxes due to the conflict with state and federal laws, but as the years have gone by more and more have been complying with all state laws and filing their taxes – a way to prove the legitimacy of the growing industry.
Unfortunately, these businesses can be taxed at up to 70% because they can’t take normal tax cuts – like writing off expenses – that normal businesses would. This has led to more cash than ever coming into the IRS, especially in states with legally operating recreational dispensaries like Colorado, Washington, Oregon and Alaska. In Oregon alone, there has already been $43 million paid in cash to the IRS, who doesn’t have the manpower needed to quickly and efficiently count all the money.
In response to this they have set up two locations – one in Denver, Colorado and one in Seattle, Washington – where they will be specifically counting cash tax payments made by cannabis businesses in these states. These locations opened up on April 10th and will remain open through the 18th, the last day the IRS is receiving on-time payments for this year’s taxes. Unfortunately, this will not be enough to cover all the businesses, and only makes a significant difference in the states where these locations have been set up.
“I’m happy about anything that smoothes relations with the IRS, but practically speaking, this doesn’t really do anything,” said Todd Arkley, a Seattle-based accountant and board member of The Cannabis Alliance. “It’s nice that the IRS is opening this window, but it’s more of a gesture to me than anything.”
Along with setting up these money counting locations, the IRS has also partnered with OfficialPayments.com and a company called PayNearMe to allow both businesses and individuals to make cash payments to the IRS at some 7-Eleven locations in 34 states. Sadly these payments can only be made in increments of up to $1,000 per day – and in the amounts that some cannabis businesses owe the IRS it could take years to make the full payment for a single tax year. So while they are working to try and find a solution, this particular solution is only really helpful to smaller businesses and individuals.
Hopefully, the IRS sees a new found importance for banking services in the cannabis industry. These businesses are already going above and beyond to comply with their state’s regulations, and even pay extremely high federal income taxes – so the least the government could do is allow these businesses access to banks, which would not only make the industry safer all around, but would benefit them as well.