Cannabis Compliant Accounting + Tax | Nesteggg Accounting- Part 2

American Bar Association endorses SAFE Act

The American Bar Association (ABA) recently released resolutions showing support for the SAFE Banking Act now hovering in limbo in the Senate.

ABA advocates protection for attorneys working with cannabis clients

The SAFE Banking Act passed in the House last year and progressed to the Senate, awaiting the scheduling of a vote. But it has stalled, even as Banking Committee chair Sen. Mike Crapo (R-ID) is receiving pressure from stakeholders to advance the legislation, and pressure from some fellow lawmakers opposed to anything that smacks of Federal legalization of marijuana.

The ABA advocates for their own constituency’s protection against prosecution or negative effects, such as the shutting down of attorney bank accounts, for working with clients who are part of legal cannabis companies and related companies.

Pushing the VA to do Research

A pair of House lawmakers, Reps. Lou Correa (D-CA) and Clay Higgins (R-LA) , introduced a bill that would require the Veteran’s Administration (VA) to do research on medical marijuana to determine its effectiveness against common vet issues such as chronic pain due to their service and post-traumatic stress disorder.

A House bill proposes to require the VA to conduct research

The VA Medicinal Cannabis Research Act is to break the loop of the Catch-22 the current VA administration finds itself in – their doctors cannot prescribe cannabis to vets where it might benefit until there is more research, and because it is still Federally illegal the VA assumes it cannot research the drug.

The language in the bill is more forceful than other bills that “allow” the VA to research cannabis, instead saying the VA “shall” conduct research. If passed, the Bill will force a reluctant VA to conduct research that could it hopes will positively impact the current non-prescribed use of opiods and other addictive substances among vets to self-medicate their PTSD, chronic pain and other service connected disorders.

It’s… Complicated but the CDTFA Will Help.

The rate changed beginning January 1, 2020, and it may have been years since you visited the concept of “wholesale cost”. But the CDTFA endeavors to help both taxpayers and consummers understand.

Retailers collect it, customers pay it, distributors remit it.

By definition the “wholesale cost” is the amount paid by the cannabis retailer (retailer) for cannabis or cannabis products, including transportation charges and after any discounts are provided.

Cannabis distributors are required to collect the cannabis excise tax from retailers they supply with cannabis and then remit the 15% excise tax on the sale price. Except they don’t know what the retailer, in the end, will really charge the customer. So the tax agency came up with the average wholesale cost to make calculations easier.

Example
Below are the CDTFA’s examples on how to calculate the wholesale cost and then how to calculate the tax they must remit on those sales.

Cost of the Cannabis Product	$1,500.00
Less 25% Discount	$375.00
Subtotal	$1,125.00
Transportation Charge	$100.00
Retailer’s Wholesale Cost	$1,225.00

The average market price and the cannabis excise tax due are calculated as follows:

Retailer’s Wholesale Cost	$1,225.00
Plus, the current mark-up ($1,225 x 80%*)	$980.00
Average Market Price	$2,205.00
15% Cannabis Excise Tax Due ($2,205 x 15%)	$330.75

If you still need more explanation see the Special Taxes and Fees rate page at www.cdtfa.ca.gov/taxes-and-fees/tax-rates-stfd.htm, under Cannabis Taxes.

Science Needed

In an election year it is natural that the question of legalization of marijuana should come up. But last month on the campaign trail Presidential candidate Joe Biden raised the issue of science. Though Biden has not exactly come out against legalization, he does take a more moderate stance, wanting there to be more research before it becomes legal on the Federal level.

Studies are being done into marijuana use and medical applications in both the US and abroad. The University of Sydney in Australia recently studied whether cannabis would have an affect on curtailing addiction. The University of New Mexico has undertaken a data study to see if cannabis products are effective in ameliorating pain.

Science cannot keep up with demand however. Although CBD products are already on the shelves in the UK, the Food Standards Agency (equivalent to our FDA) has issued advice that CBD products should not be considered for medical application. And any product that is not registered with the agency by March could be pulled from store shelves.

While those that oppose legalization may be looking for studies that highlight the downside of marijuana use, those in the industry would also benefit from more study but focused on the uses and effects of cannabis for medical application.

USDA Hands are Tied

The USDA told hemp producers that it could not change the rules that set the allowable limit of THC in their product.

USDA cannot completely free industrial hemp of regulations

While the agency can, and is open to changing other aspects of the 2018 Farm Bill that made non-intoxicating cultivars of hemp legal to grow in the US, it cannot change the allowable level of THC because that part of the bill is statutory and can only be changed by Congress.

The 2018 Farm Bill, although it did not “legalize” CBD, opened the window enough to see the market of CBD oil and products explode in ensuing years. Though hemp had historically been an industrial crop in the US, the Marihuana Tax Act of 1937 effectively destroyed the hemp industry. While industrial hemp continued to be cultivated and used for industrial products such as rope and canvas, most notably in WWII hemp was used extensively for uniforms, tarps, and rope, the scale was limited.

One tweak the USDA has agreed to visit is allowing industrial hemp growers to re-purpose “hot” hemp – hemp that tests higher than the allowable 0.3% THC – rather than destroy it.

States Rights Compete with Federal Will

Just as several governors were talking about how their States were dealing with legalizing marijuana and the market in their own state, the President advocated for maintaining the Justice Department‘s ability to go after medical marijuana.

Legalization shaking out to be a State vs. Federal issue?

While States have taken into their own hands the legalization of cannabis Presidents have a back-door, budgetary method of keep their options open. A rider to the recent budget restricts the Justice Department from using its funds from preventing States from implementing their own laws that authorize the use, distribution, possession, or cultivation of medical marijuana. In other words, if a state has legalized cannabis, the Justice Department can’t use its budget to go after legal cannabis businesses in that State.

While the House recently refused to eliminate the rider protecting legalized cannabis, it is clear from other statements made by the President that he is no fan of legalizing marijuana or any leniency at all. The Federal government has always been at odds with State’s rights the question of legalization may be challenging the balance, forcing an Administration that wants control over the issue to use more authoritarian type levers.

Cannabis Degree

One might joke about getting a “degree in marijuana” (you can probably think of a few set-ups for that joke) but it has actually become a thing. Colorado State University has announced that it plans to offer a degree in cannabis at its Pueblo campus

Many colleges and universities across the nation now offer courses in cannabis

The degree will fall under the Biology and Chemistry and program will focus on the science necessary to work in the cannabis field and emphasize natural products and analytical chemistry. The University will start offering the degree in Fall.

A handful of other universities already offer some sort of degree in cannabis including Northern Michigan University in Marquette, Mich., and Minot State University in Minot, N.D., both offer bachelor’s degrees in medicinal plant chemistry. There are graduate degrees across the country, too — the University of Maryland’s School of Pharmacy offers a master’s program in medical cannabis science and therapeutics.

And more than a handful now of universities around the US offer cannabis specific courses from science, to law, to journalism. Vanderbilt Law School now offers a course on Marijuana Law and Policy, in which they examine the intricacies of legalization and regulation. At the University of Denver and the University of Connecticut students can take cannabis journalism classes.

Cannabis Business is Business

With the closure of cannabis company, Whoopie & Maya, in California this week and recent announcements of both international and regional cannabis companies making staffing cuts, the reality that the cannabis business is just business may be setting in.

Recent cuts:

Canadian cannabis producer Hexo laid off 200 employees late last month.
Another Canadian marijuana producer, CannTrust, let 180 workers go in September.
California-based marijuana tech company Weedmaps laid off more than 100 employees in October.
Pax Labs, a California vape pen manufacturer, gave out pink slips to 65 workers in October.
Another California ancillary company, delivery tech firm Eaze, also laid off 36 employees in October.
Oregon cultivation operation Golden Leaf Holdings in April cut its workforce by approximately 20% – about 33 employees.

While there are probably many factors involved in each layoff decision, and a wide ranging speculation about causes, each company must get along in their own regulatory and business landscape. And as we know those landscapes can look vastly different from one state to another, one city to another within a state.

The industry is bound to do what any nascent industry would, struggle, correct, struggle, correct until their footing has found an even keel.

Celebrity Cannabis

It had to happen. With the legalization of cannabis has come the professionalization of the business of selling marijuana. Along with that “branding”. And who better to brand than celebrities.

A variety of celebrities brand their own cannabis lines

With the announcement this week of the closing of the Whoopie & Maya brand it is worth a quick overview of celebrity cannabis. Many are lending their name, image and their own brand. But many, like Whoopi Goldberg, who’s company was focused on medical cannabis specifically for women’s pain, are jumping in with their own hardwork and focus.

Celebs like Snoop Dog, Tommy Chong, and Willie Nelson – all open marijuana users and advocates, are no brainers. But entering the fray are celebs like Mike Tyson, Montel Williams and Melissa Ethridge – names that might not be automatically linked with marijuana use. Tyson is attempting to cash in on recreational cannabis and cann-tourism by breaking ground on a ranch in the California desert that will include both consumption opportunities, recreation, and manufacture.

Even the likes of Chelsea Handler – lending her name with a sisterhood focused brand, and Martha Stewart – getting into the pet arm of the industry, are jumping in with both feet.

But as celebrities enter they too will be susceptible to the vagaries of the market. In California, Whoopie Goldberg and partner Maya Elizabeth, who started their medical cannabis business back when only medical use was legal, struggled with the changing regulatory landscape once it became legal for recreational use.

SAFE Act sponsor to help Colorado’s cannabis banking

At a press conference announcing the new “Roadmap to Cannabis Banking & Financial Services,” Gov. Jared Polis was joined by Colorado state regulators and Rep. Ed Perlmutter, the chief sponsor of pending congressional legislation that would shield banks from being penalized solely because they accept state-legal cannabis business accounts.

Colorado attempts to solve the cannabis banking issue

For each element of the plan, the document describes the strategy, policy actions and status of those objectives.

For example, one goal is to provide “guidance for state chartered banks and credit unions providing services to cannabis-related businesses.” To that end, the state’s Division of Banking and Division of Financial Services have participated in more than a dozen roundtables with regulators from other states “to discuss the challenges and opportunities in regulating cannabis-related businesses.”

Another objective is receive “legal guidance from the [state] Attorney General regarding providing services under the Money Transmission Action and the Trust Companies Act to issue public guidance for consumers and the industry.” As of now, Colorado is “doing an assessment of the specific issues that need to be addressed” and officials hope to get that guidance by spring of this year.

The roadmap Polis presented features “seven primary areas of focus.” That includes “providing clear regulatory guidance, encouraging new and emerging technologies in the banking and financial services space, reducing barriers while upholding consumer protection guardrails, and demonstrating state support for financial businesses wishing to explore cannabis banking,” according to a press release.

« Previous Page