By Harrison Furman
Is Cannabis the next great industry on the west coast, like in California and Colorado?
Over the last five years, many west coast states have legalized the sale of marijuana to people the age of 21 and older just like alcohol. Most states only allow a consumer to buy up to 28 grams or 1 ounce under state law from a regulated dispensary.
The industry is almost a $10-billion market and is expected to be worth $21 billion by 2021, doubling in less than four years. There are currently no other industry out there that are growing that fast. This is a great thing for new businesses and entrepreneurs which want to be a cultivator (grower), manufacture, distributor, and dispensary. They are creating new jobs and paying high taxes to the states who are trying to cash in to help the state budget.
In California, cannabis has generated over a billion dollars in licensing and taxes, while Colorado has generated over $226 million. California is trying to tax marijuana as high (no pun intended) as 45 percent, while Colorado’s sales tax for the product is currently 15 percent.
There are many problems in this industry. Under federal law, cannabis is illegal and businesses are required to pay income taxes and are not allowed to write off expenses.
Another issue businesses are dealing with is that under federal law, money generated from this industry is considered drug money, meaning they cannot take credit cards.
They cannot store their cash in a bank account because most banks are Federal Deposit Insured (FDIC), therefore, they are not allowed to take the money. They need to store money in vaults and safes without being robbed. There have been many armed robberies in these states. A California cannabis club incurred an armed robbery for over $30,000.
Congress must take a progressive look on the industry because over 29 States and the District of Columbia have legalized medical marijuana.
If the United States were to allow businesses to deposit their cash in banks, it can be better regulated and guarded. The government will have a better idea how much income these businesses have because they will have given less skimming off the top and probably can accumulate more federal income tax.
Moreover, if businesses could deposit their money, they will likely be less armed robberies and violent crimes because they will not store that much cash on their property. Some states have state chartered banks, but they charge high fees and can only deposit marijuana-related transactions. If the federal government eases restrictions, there will be more Cash Transaction reports (depositing or withdrawing $10,000 or more in a day), but there will be a better way to track the money.
Cannabis is an intriguing industry booming with money spent by consumers and will continue to grow. Congress will need to adjust to the fact industry is growing and not declining and look to legalize marijuana once and for all.