What’s the biggest challenge facing the cannabis industry right now, and how are you and/or your company addressing it?
One of the most significant challenges currently facing the cannabis industry is navigating the complex tax environment, particularly the issues arising from IRS Section 280E. This tax code prohibits businesses dealing in controlled substances from deducting typical business expenses, leading to a much higher effective tax rate for cannabis companies.
Additionally there are complexities at the level of state and local tax. In some states the local jurisdiction taxes on gross receipts and the state will then tax those same gross receipts. For example, in California, the city of Los Angeles taxes excise tax collected from the consumer. The state CDTFA additionally considers the local tax collected as subject to excise tax. To add insult to injury, the sales taxable base then includes the excise tax and local tax as part of its taxable base. It’s an infinite loop of tax.
Where do you see the most exciting opportunity for growth and innovation in cannabis?
The field of investment within the cannabis sector presents tremendous opportunities for growth and innovation. As markets mature and regulations become more streamlined, the potential for substantial capital influx is immense.
We believe in positioning our clients at the forefront of investment opportunities, guiding them through complex financial landscapes and helping them attract and secure vital capital that drives innovation and expansion.
What’s one piece of advice you would give to someone looking to break into the cannabis industry?
Entering the cannabis industry requires a balanced approach of listening & learning. It’s crucial to absorb the wealth of knowledge from those who have already paved paths in this space while evaluating which practices from your previous experience will be beneficial and which may not translate well to this unique industry.
The key is to approach this sector with humility and openness, ready to learn from the successes and challenges faced by pioneers, and to carefully select which of your prior skills and strategies can be adapted to meet the specific needs of cannabis businesses.
What is the most important thing you have learned from your experiences in the cannabis industry?
A critical lesson from my experience in the cannabis industry centers on the emphasis on profitability over mere revenue generation. There’s a common pitfall in many businesses, especially in nascent industries like cannabis, where the focus heavily leans on revenue growth at the expense of profitability. This approach can lead to unsustainable business practices and a race to the bottom.
It is crucial to strike a balance—ensuring that as your business grows in terms of revenue, it also remains fundamentally profitable. This balanced perspective allows for more sustainable growth and long-term business viability, ensuring that expansion does not outpace the financial health of the company.
What do you want your legacy to be as it relates to the cannabis industry?
I aspire to leave a legacy of transformation within the cannabis industry. Through my company, I am committed to turning around cannabis businesses financially, making them not just viable but highly investable and successful.
My goal is to be remembered for fostering financial stability and growth in the cannabis sector, enabling businesses to achieve their full potential through sound financial practices and strategic insights.
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