The Grass Isn’t Always Greener
There are several ways that entrepreneurs can profit from legal marijuana. Interested business owners can apply for a dispensary license or become a grower or sell cannabis-infused products, which include edibles, tinctures (extracts), salves (topical applications), and beverages. There’s also testing labs, security firms, and the high-end paraphernalia market, like the glass blowing community, with medical marijuana users spending as much as $10,000 for a weeklong tour of the weed industry.
It can cost anywhere from $1 million to $4 million to finance an upstart dispensary or growth facility. And annual revenues for dispensary owners range from less than $100,000 to more than $1 million, according to the Marijuana Business Factbook, published by MMJ Business Daily.
Legal cannabis enterprises under state law are getting hammered by federal tax laws, facing an income tax rate as high as 50% to 75% compared with 15% and 30% for other businesses. The substantial charge is the result of a 1982 tax code provision barring those who sell illegal substances from deducting related expenses, such as rent or payroll, on federal income taxes.
But the big issue is banking. Financial institutions are reluctant to take deposits, make loans, or issue credit cards because marijuana is still illegal under federal law, even though 18 states have decriminalized it, generally relegating pot possession to a minor offense subject to fines. Federal law, however, still classifies marijuana as Schedule 1 of the Controlled Substances Act, which means it has no medicinal use and is a drug on par with heroin, acid (LSD), and ecstasy.
Financial institutions fear that federal agencies will hit them with racketeering or money laundering charges if they handle marijuana money. As a result, such businesses are forced into cash-only transactions, placing retailers’ safety at risk of burglary and assault. In July, the House of Representatives voted to allow banks, without penalty, to provide traditional banking services to cannabis businesses that are legal under state law.
Additionally, federal law enforcement agents continue to raid legal cannabis growers and retailers. “They will come in like gangsters and take all of your money and your product even though you are following all of the state laws,†says Amber E. Senter, veteran of the U.S. Coast Guard, who started a cannabis lifestyle brand, The Cannasseur, which consists of an edibles company and a magazine. She is also co-founder and vice president of the nonprofit Bayside Botanicals Collective, a mobile delivery service in Santa Rosa, California, providing service to Sonoma County.
Senter has been a proponent of cannabis for years, blogging her weed-growing wisdom for HailMaryJane.com. She helped a colleague re-launch a cannabis edibles company in 2013 before stepping out earlier this year with her own company, which delivers different strains of weed, concentrates, and edibles. It made perfect sense given the issues around distribution–cannabis entrepreneurs can’t use FedEx, a local post office, or regular carriers.
Mobile marijuana businesses, which offer patients convenience and owners a cheaper alternative to a brick-and-mortar shop, are flourishing across Southern California, reports the Los Angeles Times. Pot delivery services have nearly tripled in three years nationwide, from 877 to 2,617, according to Weedmaps, an online directory.
Delivery services, like dispensaries, require registered patients of medical marijuana to join as members of a collective. In California, you have to be registered in order to distribute medicinal grade cannabis, explains Senter, 34, who has lupus and uses medical marijuana.
As an edibles vendor, she sells her products wholesale to a local dispensary. She rents a commercial kitchen with a staff of six people helping her bake goods. “I’m trying to target the high-end spectrum with marijuana medicated hot chocolate, Belgium waffles, cheese straws, and other items not typically found in dispensaries,†she adds.