One shop owner tells Bloomberg he’s got to carry a bag holding thousands of dollars in cash to the state’s revenue department in order to remit sales tax payments.
“It highlights the awkward situation we’ve been placed in,” he explains. “We are paying taxes, but despite our best efforts to be good citizens, we’re still paying in cash.”
Since the business can’t open a bank account, it has to operate on a purely cash basis, making it a target for robbery — and just a huge pain in the butt for people keeping the books.
Making matters more complicated, some state and local agencies won’t accept cash payments for required taxes and licensing fees.
The owner of the Colorado shop had been operating a legal dispensary even before the recent change in state law. He tells Bloomberg that his business had an account with Wells Fargo until 2011, but then the bank decided to stop doing business with dispensaries, regardless of local laws.
Since then, he’s been paying cash for his $45,000/year licensing fees and $35,000 in state and local taxes.
“They’re encouraging cash operations, which are a threat to public safety, and much more difficult to track and audit,” says the executive director of the National Cannabis Industry Association to Bloomberg. “Wherever you stand on the marijuana issue, it serves everybody’s interest to have banking access.”
Business owners can try to hide the nature of their marijuana shop by putting it inside a shell business with an innocuous name and not telling the bank.
“As long as the bank doesn’t find out, you should be safe,” explains the director of the California office of the National Organization for the Reform of Marijuana Laws. “Or you can use a family account or a personal account. Some people have another business on the side and they use that account.”
But once the bank finds out, expect to have that account closed right away.
A rep for the Colorado Revenue Dept. says some local banks have begun allowing marijuana-selling businesses to open accounts, though these institutions risk losing their federal deposit insurance and possibly their charter if caught.
Banks are supposed to file Suspicious Activity Reports on transactions and deposits related to proceeds from the sale of controlled substances, says the FDIC.
The Liquor Control Board in Washington state, where pot was also recently legalized, says it is now prepping itself for what it expects could be the problematic intake of cash from bank-less marijuana sellers.
“We’ll need to be prepared to accept potentially large amounts of cash,” a Board rep tells Bloomberg. “Do we suddenly have to have armored-truck service? That’s a potential.”
Congressman Jared Polis of Colorado recently introduced legislation that would remove the Schedule I controlled substance designation from marijuana.
“We want to make sure they have access to the same type of banking facilities as other businesses,” explains Polis.