Where’s The Profits?

CANNABIS, THE hot topic that is seeping its way into homes and businesses around the globe as a regular subject. The consumption of this natural, yet euphoric plant, has brought about so many opinions, studies and changes, including some laws. The changes can be seen in the government, medical fields and private sectors of life. From smoking it in natural tobacco leaves and hemp papers, ingesting it through the infusion of certain foods to using it in creams, body oils and salves, this has been a subject for the century. It has also been a subject of income and how it has contributed to the economy as a whole. But how are the profits for business owners?

In this article, we will delve into the profitability, or lack thereof, of being a cannabis entrepreneur and how we in the cannabis community can advocate for change in business ownerships, social equity, taxation and distribution to widen the margin on profit dollars.

We can all agree, countries differ in laws, culture, climates and a plethora of other things. However, cannabis is the ‘sticky icky’ topic that remains taboo and for some, just downright unacceptable. One thing that also remains similar is the consumption of cannabis around the world by all persons from all walks of life.

Since the medicinal legalization of cannabis in most American states and adult recreational use in some others, cannabis users and enthusiasts want in. We want to capitalize on our passions, dreams and hobbies, (let’s be honest about the fact that it is a hobby for some) that indeed involve cannabis. We want to know we can avoid the legal issues and jailtime that so many others are serving for this beautiful plant but still be able to enjoy it on a medicinal, recreational, spiritual and profitable level….Legally, of course!

So, you want to become a cannabis entrepreneur? Have you decided on which part of the cannabis industry you want to be in? Grower/horticulturist; dispensary owner; delivery service; education or advocate? Once you have decided on which end of the business you want to be in, you must do your due diligence and in full force. There will be a lot to learn, to know and endure. One of those important business insights that you need to know is the cannabis business is not very profitable…. Until it is! Let’s explore why and how:

Laws: Are different across the globe from country to country and from state to state on where the governments stand on the cannabis issue. Should it only be medicinal and/or should it be fully, adult recreationally legal. How much is too much for one person to consume or possess according to studies and which studies do we deem correct? How much tax should be placed on the products? How should it be taxed? What type of products should be allowed for resale? The list of questions can go on and on. However, the best way to know what laws best fit your passion for the industry is to research them locally, statewide and federally so you are not going into a business without the knowledge to succeed and how to proceed. To give you some insight on the two most popular states, CA & CO (California & Colorado [1]), USA it is both medicinally and recreationally legal to consume cannabis. However, cannabis business owners cannot include certain business expenses on their tax returns for any credits due to it still being federally illegal to distribute, consume or even possess; let alone sell it, even legally. However, minds and hearts are changing frequently as more information, education and experience is being made available to those that want to be in the know.

  1. Taxation: Is a complicated subject to breakdown; especially in the cannabis world. There are many different types of taxes that can be placed on a cannabis business owner and consumer. Can you say, ‘Tax on tax on tax!’ because that is exactly what is passed on when you purchase as a consumer and what you can pay as a cannabis business owner/grower upon purchase of the product. There is an excise tax, which in plain terms is a business tax specifically for cannabis products that are passed on to the customer. In California, if a retailer purchases its products wholesale, the 15% state excise tax is typically included in the price of the item. If a retailer takes control over one or more stages in the production or distribution of a product, the excise tax can either be included in the price of the item (price mark-up) or added to the customer receipt as an added tax to other taxes the consumer is required to pay. Sales Taxes is another bugger of taxes the consumer is required to pay upon receipt of purchase. This will vary from state-to-state.
  2. Banking: Is a major obstacle for the cannabis entrepreneur. Because the cannabis industry is still considered illegal on the federal level and only allows the business sales deposits to be cash only; That has been an extreme strain on many businesses. Not to mention the up-and-coming cannabis entrepreneur. Some major concerns are robbery during transport and misplaced funds. Also, trying to keep up with the cash and receipts is a small business headache by itself. When transporting such large amounts of cash, there is always a safety risk; as well as a risk of the loss of sales funds. Many of us in the cannabis community are advocating for the S.A.F.E or Secure and Fair Enforcement Banking Act. This will allow depository institutions to service legitimate cannabis-related businesses without being penalized by the federal banking regulators [2] . The S.A.F.E. Act was passed in the US Congress on April 19, 2021. It has yet to be passed by the US Senate. The safety and monetary side of this problem has been an added worry amongst the cannabis industry and business owners. Having to deposit cash from sales and services, the chances of being robbed by criminals or having your cash ‘confiscated’ by federal law enforcement agents/DEA has become a growing concern. And I mean upwards of up to $1.2 billion in cash from cannabis business owners’ sales and business transactions. Even with the assistance of licensed and bonded armored transportation services, the federal government can seize the cash being transported because it comes from cannabis transactions. Where is the justice? This is another topic that will need to be continued as those that have had their money taken, and yes, it is considered taken even if it is the government, near court dates and hearings so that we can provide an update.

This is not an article to deter those that want…. no, desire to be in the cannabis industry. Whichever part of it you choose, let these be guidelines of how to maneuver amongst the obstacles….because there will be obstacles. Just like in any other business industry, you will have to follow rules, regulations and stay the course if you want to succeed. Although, the cannabis business can be lucrative, it will take some time before you actually see a living and relaxing profit. I suggest reaching out to cannabis business owners and being mentored or coached in order to get a feel if this is the right industry for you.

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