The Problem with Pot Shops Not Being Able to Take Credit Cards
Posted by Marijuana Doctors on 05/14/2013 in Medical Marijuana Laws
Each month, Elliott Lug or one of his business partners takes a stroll into the Colorado Revenue Department with a bag full of thousands of dollars. Depending who brings the money that day, they watch on as state employees start counting the stacks and stacks of money. Elliott Klug is the co-founder of PinkHouse Blooms LLC, comprised of a chain of five medical marijuana dispensaries that are located in Denver.
Klug has to pay his sales taxes in cash because current federal law does not allow banks to offer accounts to medical marijuana dispensaries. The state of Colorado even allows and taxes these pot shops. Klug said, “It highlights the awkward situation we’ve been placed in. We are paying taxes, but despite our best efforts to be good citizens, we’re still paying in cash.” Moments like this are where owners and co-owners of marijuana dispensaries find themselves growing grey hairs. For the longest time, these shops must operate in a grey area and fall under the stigmas and prosecution of federal agencies.
The state of Colorado is one of eighteen medical marijuana states and one of the eleven states that permit sales through dispensaries similar to Elliot Klug’s. Sales are made from patients purchasing medical cannabis with a medical marijuana card. However, federal law labels marijuana as a controlled substance and places it alongside drugs such as heroin and cocaine. Due to this classification, it is required that banks report related transactions involving medical marijuana as suspicious activity. This unfair inconsistency is responsible for developing a grey area for medical marijuana dispensary operators. These operators have the choice to choose between operating as a cash-only business, leaving them susceptible to robbery and fraud, or try to find a creative and innovative way to open checking accounts and accept credit and debit cards. However, credit cards and debit card processing is one of the most difficult scenarios to conquer for medical marijuana dispensaries. These credit card processors constantly view the industry as a major liability.
Aaron Smith is the executive director of the Washington-based National Cannabis Industry Association and firmly believes that government encouraging cash operations is a major threat to public safety. He also believes that by operating in cash, it greatly complicates the process of being able to track and audit any operations. Dispensaries are required to pay federal, state and local taxes while in addition to the mandatory state and local licensing fees. These fees often run up to tens of thousands of dollars annually and can be a hefty burden upon a dispensary owner. Many government agencies do not accept cash as well, which is a problem that Smith addressed to further exploit these complications.
For a long time now, the medical marijuana industry has operated in a grey area that does not seem to ever pass. Without the cooperation of state officials, regulated marijuana programs and the help of the federal government, the industry will never have a chance to drop these “cash only” services and ante up to legitimate credit card processing. It is anticipated that in due time the government will eventually get a chance to see the benefits of this industry and recognize the medical marijuana industry’s true value.
Image Refrenced: Bloomberg News
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