If you’re one of the 52% of Americans that have tried cannabis, you may have visited a dispensary and noticed that the only payment option accepted is usually cash. In our current technology driven world, you may wonder why the most convenient form of payment is not accepted at majority of shops. Although 33 states and the District of Columbia have passed laws broadly legalizing marijuana in some form, it is still federally illegal. This results in nearly every big bank keeping as far away as possible from the pot industry in fear of being set up for federal drug charges.
In addition to consumers being forced to pay cash for products purchased, many dispensaries have no other choice but to pay their employees in cash. Paying employees this way usually means state and federal income taxes are not properly accounted for; or at all.
Did you know that in 2018 alone the government collected an estimated $4.7 billion in taxes from legal marijuana businesses? Unlike most companies in the United States, majority of these cannabis organizations were forced to pay their federal taxes in cash. That means that when a business pays their federal taxes, they are required to schedule an appointment with the IRS to make a cash deposit to its local offices. This process is not only wildly inefficient, but it costs the IRS about nine times more than a traditional electronic payment.
Apart from the headaches created by paying your taxes in cash, forcing your customers to pay in cash and the inability to partner with a financial institution; maintaining large amounts of cash on hand is extremely dangerous. With limited access to banking, companies are unable to process credit card payments, obtain lines of credit, write checks to suppliers and deposit cash.
Current legislation brought by Representative Ed Perlmutter proposes a marijuana-banking reform measure called the Secure and Fair Enforcement Banking Act (SAFE) of 2019 would allow financial institutions to serve cannabis companies. The SAFE Banking Act was in fact passed by the House of Representatives in September of 2019. Despite this victory, the SAFE Banking Act still requires the approval of the Senate and the President to become a law.
“The SAFE Banking Act is focused solely on taking cash off the streets and making our communities safer. Only Congress can provide the certainty financial institutions need to start banking legitimate marijuana businesses – just like any other legal business – and reduce risks for employees, businesses and communities across the country.” –Representative Ed Perlmutter
Many of those that oppose the SAFE Banking Act are not up for debating a partial solution for financial institutions but more so determining if cannabis should still be listed as a Schedule 1 substance. While this is a very relevant and important topic to discuss, this debate could go on for months and prevent the SAFE Banking Act from getting passed. Whether the SAFE Banking Act is approved or a larger debate is held regarding the federal legalization, all parties involved have the potential to lose money every day until something is done.