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15 May 2018

Cashing In: How Cannabis Businesses Pay Their Taxes

Cashing In: How Cannabis Businesses Pay Their Taxes

Did you know that Texas recently legalized the sale of medical marijuana? For now, it’s limited to certain low-THC cannabis oils for seizure patients only, but it could be a sign of changing times for the big business of cannabis in the Lone Star State.

There’s just one problem.

While a growing number of states have legalized the sale and use of cannabis (a word preferred over the term marijuana by professionals in the business), it’s still considered a Schedule 1 drug at the federal level (in the same category as heroin and one step above cocaine and meth). This makes it technically illegal under federal law.

So, then, do cannabis businesses need to pay federal taxes? Yes. But it’s not easy.

Of course, the IRS still wants its cut, yet banks are not legally allowed to provide financial services to pot-related businesses. This means many cannabis businesses—even in states that have legalized marijuana—cannot open or utilize bank accounts or pay any taxes (local, state or federal) with anything but actual cash. As you can imagine, this has forced business owners to follow very dangerous business practices to keep their money and employees safe and to pay their taxes.

Tax Analysts’ Wesley Elmore and Paul Jones paint a picture of how this sorted practice plays out in their recent article, “California Pot Money Takes Long, Strange Trip to Bank.”

It’s estimated that U.S. marijuana business owners will owe $2.8 billion in taxes to the federal government this year. That’s a lot of cash, so many experts believe federal laws will need to change soon. Canada is planning on leaping into fully legalizing pot later this year, a move many U.S. business owners will be watching closely. Until then, armed guards and bags filled with cash will continue to be the norm for those brave enough to “weed” into the business.

 

Image Copyright: mrorange002 / 123RF Stock Photo
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