In many ways, the cannabis industry has been set up for failure in the mainstream market. Because it’s not yet been legalized at the federal level and in many states is viewed with great condemnation, most banks aren’t willing to collaborate with cannabis-related businesses.
Companies are forced into a cash-only model, which increases the chance of theft, fraud, and human error.
Of course, this is just one of the many setbacks faced by cannabis industries in this country that often go unnoticed by the general public. Like most capitalist markets, the nitty-gritty details from production to final product are usually kept under wraps. At Beard Bros Pharms, we aim to educate our customers so that they can make conscious purchases in brands they trust.
The Federal Dilemma
Because marijuana is still illegal at the federal level, most banks aren’t willing to work with marijuana-related companies. This means that cannabis businesses can only make cash transactions.
Furthermore, most consumers are forced to pay for cannabis products with cash because many major credit cards forbid the purchase of marijuana-related items, which only adds to the pandemonium. These cash-only regulations lead to a number of problems, including issues with accounts payable, theft, and fraudulent transactions.
Cannabis businesses face a variety of cash-related challenges, including vendor conflicts, cash divergence, and payroll discrepancies. Additionally, due to the cash-only model, cultivators are more likely to face robbery at grow operations and even at employees’ and business owners’ homes.
And if that weren’t enough, the IRS’s criteria for sizable cash deposits are also challenging to achieve. Currently, every cash transaction that consists of $10,000 or more must be reported on Form 8300. Growers and sellers will be penalized for tardiness or inaccuracy. Not to mention, they’ll pay hefty taxes year-round.
The Dangers Of SAFE
The SAFE Banking Act is viewed as a potential remedy by several cannabis CEOs and anti-prohibitionists. Some banks are eager to connect with the cannabis market, and the SAFE Banking Act would give those institutions more protection.
In February of 2022, a sixth attempt the have the SAFE Act passed in the House was made. Most recently, it was a part of the America COMPETES Act, but the US Senate, unfortunately, dropped the SAFE Act.
But many cannabis industry professionals, including business owners and accountants, think that the SAFE Banking Act is the switch that will enable banking for all cannabis-related businesses (CRBs). Those in favor of SAFE believe that the act will make it possible for any CRB to collaborate with major banks and open up accounts more freely.
Unfortunately, this is simply not the case.
Even if SAFE Banking were eventually passed, it would take a while before cannabis businesses could open accounts with significant financial institutions like Chase or Wells Fargo. Additionally, because the cannabis sector still relies heavily on cash sales, the aforementioned cash-related problems will persist until cannabis is legalized at the federal level.
Therein Lies The Issue
Somewhat discouraging is the fact that this is just one of the many issues faced by the cannabis industry today. Until cannabis is legalized at the federal level, the industry will continue to face setbacks and hurdles.
Not only that, people across the country – including our vulnerable veterans – will be left without the vital medication they need to live fulfilling lives.
So many aspects of the cannabis industry go unnoticed by the general public because they are not put in situations where they would be privy to those aspects. As growers and consumers, it is essential that we continue to educate ourselves on the problems embedded within the system and subsequently within the industry so that we can make informed decisions at checkout.
Enjoyed that first hit? Come chill with us every week at the Friday Sesh for a freshly packed bowl of the week’s best cannabis news!