April 20th is a day of celebration for those in the cannabis industry. States and countries are changing the laws on the growing, selling, and using of cannabis almost weekly. A confluence of dedicated lobbying by groups such as norml.org and the Marijuana Policy Project, along with a generational change, the understanding that opiates are killing people, and perhaps finally a recognition of the original reason for its Schedule I status –racism and cotton — are pushing sanity on cannabis.
It is typical that the medical aspect of cannabis is the first doorway to legalization. Years of studies in Israel, as well as some recent research in the US, have shown us that not only is cannabis a safe, responsible alternative to opiates for many pain sufferers, it also has some life-changing possibilities for seizures and cancer. This natural plant is also mitigating many other acute and chronic issues.
Since the plant has been illicit and those that grow and sell it haven’t needed to comply, the move towards legalization is daunting. Currently, many states have only legalized medical use. Some states are further along with legislation, but the implementation is slow. Three states are adult rec legal. In each of these states, navigating the compliance and banking issues are the primary concern of those moving into the legal market. They are living in the grey now, but to survive they realize they need to move.
What does that entail? Finding a good business attorney and a good tax accountant, preferably ones that understand 280e. For those professionals wanting to know about this area of growth, and it is a large area of growth, check out IRS 280E and Its Application to the Cannabis Industry, by Robert Carp, Esq.
The focus of 280e is to disallow deductions that other businesses typically enjoy. The only deduction allowed is COGS, so segregating the business expenses becomes critical.
California is about to change the whole dynamic of this industry in January 2018. The state is currently taking applications for 11 different types of licenses. Each of those applications will need financial data and projections, along with a solid business plan and operational documentation. With California being the sixth largest economy in the world, the revenue from cannabis in California will be the tipping point for the full legalization of this plant nationwide.
Lawmakers have introduced Assembly Bill 1587 that would make California a ‘sanctuary’ state for the cannabis industry and the residents who use the plant legally. It would prohibit state and local officers from enforcing particular federal marijuana laws on growers, businesses, and consumers.
A large real estate corporation, Kaylx Development, in New York City, has developed a division to deal with real estate for this industry, another difficult arena, and the first step needed to obtaining any license.
This marijuana is not the low-tech grunge pot loaded with seeds and sticks you bought by the J or the bag. Today’s cannabis is a high-tech, clinical, and complicated business that produces quality medications and mood-altering products. I tell potential businesses in this area to remember Al Capone did not go to jail for illegal alcohol sales or murder, but rather for not complying with the IRS.
Will you fill the need for knowledgable accounting and legal advisors within the cannabis industry? The need is growing and there are opportunities for those who are willing.
Penny Breslin is the founder of MoneyPenny, a consulting firm specializing in helping accounting firms and other businesses embrace the power of technology to simplify their operations and increase their profit margins.
Penny has been recognized by Worldwide Who’s Who for showing dedication, leadership, and excellence in providing quality consulting services to an international clientele made up of CPA firms and other businesses.
Penny holds a Master of Business Administration in Global Management and is a member of the Intuit Pro-Advisor Group, is a Xero Certified Advisor, a member of the Wave Pro Network, and a FreshBooks consultant. A firm believer in being able to work from anywhere, you’ll often find Penny running her business on the beach after a morning surf session.