Financial Cost Federal Prohibition Weed Journal

We often talk about ending the Federal Prohibition on Cannabis from the patient or smoker’s perspective. And of course, that is the ultimate objective of the legalization movement; to give each of us the freedom to decide as individuals what we put into our bodies.

However, there’s another urgent reason to bring an end to the Federal Prohibition and bring consistency to the laws on Marijuana. Imagine if you are a business owner and your business couldn’t deduct legitimate business expenses? Under the current IRS code (IRC Code 280E), this is exactly what is happening. Because cannabis is considered an “illegal drug” by the Federal Government, businesses that deal in legal Marijuana are having to pay tax rates as high as 70%. This has a pervasive effect on the industry: one, it ultimately drives costs higher for patients and customers. Two, with costs being so high, there will be a drive for volume at the expense of quality and competition. The smaller players will be forced out by large corporations.

Just to go through how the industry is impacted, here are some basic things that Marijuana businesses can’t do:

1. Marijuana can’t be transported across state lines. If it’s grown in a legal state, it must sold in that state. Similarly, if you are buying in a legal state, it must be grown in the state. While this sounds fairly “harmless” on the surface, it is resulting in artificial price disparities from one state to another. Due to differing state laws and the resulting disparities in legal Marijuana demand, prices can vary wildly from one state to another. Imagine if you are a grower in one state doing the same work as a grower in another but you are prevent by the Federal Government from being compensated similarly and at the true market rate.

2. Banks are subject to very strict Federal anti-money laundering laws, and because of this, banks are reluctant to have relationships with Marijuana businesses. This means many Marijuana businesses can’t deposit their daily receipts, which must be all cash because they can’t process credit card transactions. Is it fair to tell these business that they must take additional risks and steps to safeguard all the cash? And even then, if all the criminals know they’ve got all this cash which they can’t deposit, some of them are highly likely to come looking to find out where¬†the money is being kept. The state says it’s legal and have issued business permits but because of the Federal Prohibition on Cannabis, they must risk life and health to do business.

3. Landlords are reluctant to lease to Marijuana businesses due to their mortgage with banks. There are obviously legitimate reasons a landlord may not want to lease to a cannabis related business. However, what is happening is there are landlords willing to do business, but are reluctant due to the Federal Prohibition and fear of running afoul of their mortgage agreements with banks. This hampers the free market and drives up rent for Marijuana businesses. If location is everything to a business, the Federal Prohibition is putting Marijuana businesses at an immediate disadvantage.

As more states legalize marijuana, the difficulty and costs of inconsistency will just continue to go up with small business and individuals/patients paying the price.

Contact your representative and let them know you support compassionate laws based on common sense. Support legalization of marijuana across our land.

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