In order to pay federal taxes, many licensed, regulated, cannabis companies have to launder their cash. Why? Because banks will not open an account for a cannabis business due to cannabis being illegal at the federal level. How exactly then do dispensaries, cultivators, retailers, transportation and other cannabis businesses pay Uncle Sam taxes if they can’t legally open bank accounts? The answer to that is a proprietary process.
The conversation really hits home and highlights the pain point that cannabis entrepreneurs face when you consider that without a bank account, how do these small business owners do all the extravagant things that Main Street businesses need to do like:
- Pay employees
- Pay for health insurance
- Get a business loan
- Start a business line of credit
- Finance a purchase order
- Book airfare, travel, hotel, or even pay for Google Suites, Norton Anti-virus subscriptions and other online services. Surely its easy to operate a business as though its 1995 and the internet doesn’t exist, right?
- Not be targeted by thieves and organized crime for robbery, extortion and kidnapping because everyone knows you are forced to store stacks of cash because you can’t legally open a bank account
Before we get into the process of how regulations force small business owners in one of the most heavily regulated industries in America, to launder money to pay taxes, a few fun cannabis related facts:
- All businesses, regulated or illegal, have to pay taxes. Just ask Al Capone.
- Cannabis is illegal at the federal level.
- “Former 12-term congressman John Boehner of Ohio will make $20M as a board member of Acreage Holdings, a marijuana investment firm whose sale to a cannabis industry giant hinges on Mr. Boehner’s ability to persuade Congress and the federal government to legalize, or at least legitimize, marijuana.”
- In 2018, in Colorado alone, there were $1.55 billion in regulated cannabis sales. And you bet Uncle Sam got his cut.
- Cannabis compliance is the fastest growing compliance sector.
Now, to get back to the process of how one legally launders money to pay their Federal Taxes.
- Organize your business. You need to incorporate your business and comply with all local and state regulations.
- Do you need a specific license?
- What inspections are required?
- Where are cannabis operations zoned for operations in your jurisdiction?
- And other such basic business formation questions.
- As you form your business, evaluate what your tax obligations and organizational structure should look like.
- This means you’ll talk to your lawyer, accountant/bookkeeper and tax advisor to determine, based on your jurisdiction and unique circumstances, what are the best options for you.
- Hire a professional. This is actually step one. You’ll appreciate why you should hire a professional once you consider how setting up your business determines your tax obligations as much as what business you’re in.
- Follow me, Samson Williams, (@HustleFundBaby) to learn more about how to set up a cannabis business and operate it in a compliant manner. I’ll be speaking at the CSS Fall 2019 Conference on cannabis compliance September 23 – 25 in Scottsdale, Arizona sharing some lessons learned from Jamaica of all places. Did you know Jamaica has quite the robust, regulated cannabis industry?
Together with you, I look forward to helping all of America’s Main Street entrepreneurs set up thriving, local businesses. I may secretly also be out to address the injustices of the War on Drugs and Mass Incarceration on Communities of Color. But we won’t tell you that until after you’ve made ungodly sums of money and are questioning whether or not you’re gonna get into heaven having made millions selling a plant that has caused the loss of freedom of literally millions of young Black men and women. #SocialJustice
Thank you for reading my article. I regularly write about technology, cannabis, crowdfunding, real estate, health and compliance investing trends on LinkedIn and for Blockchain Business Magazine. To read my future posts, simply join my network or click Follow. Also feel free to join me on Twitter, Facebook, Instagram, or YouTube.
About Samson Williams
Samson is an internationally recognized anthropologist and expert in Operations & Technology, Blockchain, Cannabis, cryptocurrencies, mobile payments, mortgage finance and organizational change management in FinTech.
Samson is ranked among the globe’s top innovative technology professionals for his cutting-edge research and applications in crowdfunding, tokenomics and digital securities. Samson is an adjunct professor at the University of New Hampshire School of Law , Columbia University and Principal consultant at Axes and Eggs. For business inquiries Samson can be reached at firstname.lastname@example.org
Samson will be speaking at the upcoming CSS Fall 2019 compliance conference during the session “RegTech Revolution,” which will explore the rapid pace of change and the intersection of technology and regulation at financial services firms.
Disclaimer: This is a guest post written by Samson Williams. The views expressed therein are the views of the author and may not reflect the opinions of CSS. This post is for informational purposes only and not for the purpose of providing legal advice.
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