States want to track cannabis sales and, of course, collect taxes on such sales. But with cannabis companies often not having any business bank accounts, this can prove to be somewhat of a challenge.
Currently, around 400 banks and credit unions are conducting business with the industry. The majority are small institutions that typically serve states where cannabis is legal. (2) Banks and credit unions that deal with cannabis money place themselves at higher risk of being charged with money laundering. (5) That’s why cannabis businesses deal largely with cash, which in turn causes issues with the collection of taxes and business operations.
As one would expect, cannabis taxes must be paid in cash. This makes tax collection extremely cumbersome. (3) Although many customers favor not having a record of purchasing cannabis, the cash is untraceable, and businesses must still be able to account for every dollar collected.
States are requiring seed-to-sale tracking of cannabis plants (6). As a result, specific tracking software has been created to keep records of all cash transactions as they occur. This will help to reduce the odds of money going missing and to automatically have tax money sent to the appropriate government entity for every transaction. Ultimately, such measures could ensure that all transactions can be more easily traced.
At the end of the day, the responsibility for taking appropriate measures for tracking and controlling cash and cash transactions lies with the cannabis dispensaries themselves, and that includes making use of transaction tracking systems.
- Mandelbaum, R, “Where Pot Entrepreneurs Go When the Banks Just Say No“, The New York Times, January 2018.
- Lynch, S, “Exclusive: U.S. Justice Department blindsided banking agency on pot policy flip – sources“, Reuters, January 2018.
- “Why Cannabis retailers can’t use banks“, The Economist, January 218.
- Berke, J, et al, “Michigan is the 10th state to legalize recreational Cannabis. This map shows every US state where pot is legal”, Business Insider, November 2018.https://www.businessinsider.com/legal-Cannabis-states-2018-1
- Sullum, J, “Cannabis Money Is Still A Pot Of Trouble For Banks“, Forbes, September 2018.
- Curren, B, “Seed-To-Sale Tracking And Compliance: If Coffee Was Regulated Like Cannabis“, Forbes, August 2018.