You may have read on our infographic or in our blog post breaking down the marijuana law that many marijuana businesses are still only able to operate with cash. This is because despite efforts from the government, banks are slow to allow these businesses to function like any other operation.
This is not ideal due to the danger of being a cash-only business. When businesses operate with cash only, they are more vulnerable to theft and other crime, not to mention the extra time that needs to be taken to keep the books and finances in order.
Recently, another growing pain of marijuana businesses became apparent thanks to the IRS. In early July, the IRS fined these legal businesses because they did not have bank accounts. According to the Denver Post, the fine occurred because the IRS mandates that all businesses pay by bank wire for the quarterly tax. If you don’t have a bank account, which is true for almost all marijuana businesses, this is completely impossible.
This impossibility led to a whopping 10 percent penalty. Many dispensaries are challenging this unfair penalty, and rightfully so. The penalty is meant for taxpayers who opt not to use the online system—not for those that actually can’t.
These businesses want to comply with the law, but they simply can’t.
What needs to occur for this fine to stop happening? Either banks need to start allowing the dispensaries to open a bank account, or the IRS needs to make an exception to the rule.
Unfortunately, until the federal government recognizes this as a legal trade, banks are cautious to allow dispensaries to open accounts. With this knowledge, on July 11, Sen. Michael Bennett and Rep. Ed Perlmutter asked the IRS to stop fining marijuana businesses. In a joint letter, they requested that, due to the challenges faced by these burgeoning dispensaries, the IRS make a clarification.
At Hunsaker | Emmi, P.C., we will be watching these events very closely to remain cognizant of how this would affect your business. If you are involved in a marijuana dispensary and want to ensure that you are not illegally fined, be sure to contact a marijuana business law attorney today.