The 5 Biggest Difficulties In The Marijuana Business Today

What are 5 Biggest Difficulties in Cannabis Right Now? from CannabisNet on Vimeo.

As with any business, the marijuana industry faces certain difficulties. As the industry begins to grow larger and larger, more difficulties associated with running businesses in this field are emerging. With the recent legal activity of more and more states legalizing its usage, the marijuana industry has become a thriving and extremely lucrative business in these states. Unfortunately, there are also numerous difficulties those in the marijuana industry face, despite it being legalized in their own states. Not only is it hard to begin businesses in the marijuana industry, but it's also hard to keep them in business due to these hardships.

In this article, we'll discuss five difficulties businesses in the marijuana industry face.

Banking - Probably the Biggest Problem

Big banks simply won't accept money from businesses in the marijuana industry, nor will they provide any of the services most businesses are given without a problem. Primarily, the reason banks don't want to work with these businesses is due to the fact that marijuana is still federally illegal. It's a gray line and banks only see in black and white. In addition, banks are also leery of being associated with the sale of marijuana and the problems which may arise from that association, including, but not limited to, issues such as marijuana being sold to underage minors, the sales of such being used for funding criminal organizations, or the sale and transport to states in which marijuana has not been legalized.

In this situation, it is not just simply that they can only accept cash sales, but it also affects the distribution of monies in order to maintain and stay in business, such as paying employees, paying rent and utilities, or keeping insurance and worker's comp, among many more payment distributions. All of these would have to be paid in cash with extensive records being kept for every dollar coming in and going out. Without an electronic path to follow, money can get lost. Furthermore, where would a business keep all that cash? It's definitely a tough situation. Even though those in the marijuana industry are certainly making a lot of money right now, without some type of medical cannabis payment solutions, it is definitely something to consider before getting into the industry.

Legality - Another Huge Problem

The fact that marijuana is still illegal at the federal level is definitely a harsh reality for those in the marijuana industry. Some states have legalized recreational and/or medical use of marijuana despite it being illegal at the federal level. Previously, the federal government said that it would not interfere in states which had legalized, but the fact is that marijuana remains listed as a schedule 1 drug even though it's removal has been proposed repeatedly since 1972. Schedule one is reserved for drugs for which there are no medical uses currently for this drug, which is not true at all of marijuana. As such, it should be removed. Furthermore, it's without a doubt that marijuana should be federally legalized, taxed, and used to help the entire country, money-wise and medically.

Federally, marijuana is still looked at as a dangerous drug, but that has been proven over and over again not to be true. In fact, it has been proven numerous times just how effective it is as medication for hundreds of ailments, diseases, and illnesses. Under Obama, the federal stance was more relaxed, but now, under Trump, it may not be so. Legality aside, any hint of wrongdoing on the part of those in the marijuana industry brings instant federal attention. Again, this is also something that should be considered thoroughly before going into business in this industry.

Taxes - Great for the State, Bad for the Business Owner

Even in states which are completely legal, business owners may face up to 70% tax rates. Additionally, the IRS prohibits businesses in the marijuana industry to receive any kind of tax breaks that are readily available for other types of businesses. In most part, this is due to the fact that the IRS, which is a federal body, looks at this industry as distributing illegal substances.

Another reason taxes are a difficulty is the fact that since banks won't work with those in this industry, written records of cash exchanges for goods and services must be thoroughly kept. Expect to be audited by IRS, as well. Despite actually being illegal at the federal level, those in the marijuana industry still are expected to pay taxes and very high taxes, at that. Regardless, businesses are raking it in hand over fist. It's estimated that the present marijuana industry is bringing in almost seven billion dollars a year, with loads of that profit going for state and federal taxes. Colorado last year made around seventy million dollars in marijuana taxes alone.

Yes, it is a lot of taxes, but in this case, businesses are still making enormous profits. States in which marijuana isn't legal for recreational use yet, as well as the federal government, need to realize what these taxes could do for each state and the nation. In addition, if marijuana was made legal at the federal level, perhaps taxes would go down, at least in part. Either way, before getting into the marijuana industry, consider just how much is going to be paid out in taxes.

Security - Having All That Cash on Hand is Dangerous!

With banks not doing business with those in the marijuana industry, they have to keep their money somewhere. Some may have on-site safes or vaults, but the bottom line is, there is nowhere safe to keep cash besides the bank system. Accumulating cash on a day-to-day basis with no where to stash it increasingly becomes more and more dangerous the longer an establishment is in business.

The best security, besides being able to put the money in the bank, would be to first hire armed guards for keeping an eye on things as well as acting as a deterrent to would-be robbers. Cameras should be installed in all spaces in which cash exchanges are made and/or where cash is kept. Heavy duty safes and vaults need to be utilized at all times to hold the bulk of cash and there should be extensive alarm systems in place. Furthermore, access to large amounts of money should be extremely restricted. Unfortunately, no matter how safe kept the money is, there will always be danger involved until the federal government comes around to legalizing marijuana, therefore allowing banks to accept money from those in that industry. This should definitely be considered before entering the marijuana industry.

Black Market - There Will Still Be Other Means of Buying

Illegal sellers will undercut prices of the marijuana industry, creating a niche for themselves. This obviously takes away from profits of those who sell legally as well as taking away potential taxes at both state and federal levels. According to statistics, only 59% of those who live in Colorado buy from legal dispensaries, meaning 41% are buying elsewhere on the black market. In addition, marijuana can be grown in a legal state then shipped to a state where it is illegal for sell and distribution, avoiding taxes all around. With the taxes being so high, it's really no wonder that this happens.

Perhaps if marijuana became federally legal to use and sell, taxes could be better regulated, bringing a halt to much of the black market sales. If marijuana was easier to get legally, more would buy it legally instead of risking an illegal purchase. Until then, however, this is just one more consideration which needs to be thought about before going into business in the marijuana industry.

The movement towards federally legalizing marijuana is ever moving forward, albeit slowly at times. The bottom line is that it does indeed remain illegal at the federal level, making it impossible to feel safe even within legal states when entering the marijuana industry. Considerations should be thorough before decided to enter the industry. Whatever you decide, keep meticulous records and adhere completely to your states' laws and you shouldn't have a problem, except where to keep all that cold hard cash! Surely something will come to mind!