Banking Side of Marijuana

The state and federal governments don’t see eye to eye when it comes to the legalization of marijuana. The disagreement means most banks still can’t provide services to cannabis businesses. Money that would be deposited can’t be insured by the FDIC because the federal government views marijuana as an illegal drug. As a result, many in the industry accept cash only. They’re also paying employees with cash, meaning the state is losing out on tax revenue. “There’s no way for us to even see or to verify if they’re even reporting the correct amount, because there’s no bank statement, no credit card statement,” said Fiona Ma, chair of the State Board of Equalization. “That is a big concern, so we estimate that we’re only collecting about 25 percent of the taxes actually due.” Businesses like Kind Peoples Collective in Santa Cruz County have limited services through a local credit union, but are required to pay a fee because their account is considered high risk. Christopher Carr with Kind Peoples Collective says cannabis businesses deal with lots of other fees. “An abundance of costs that are unnecessary, unfortunately. They are our reality and we need to make do with what we can until the laws change,” Carr said. The Board of Equalization and the state treasurer are working with other stakeholders to find options within the state until the federal government takes action. One idea under considerration – establishing a state bank. “There is a precedent for it in other states,” says Ma. “It’s not the easiest solution. People are also proposing closed loop systems where everybody deposits into some depository and is able to transact, pay their taxes, pay vendors and collect revenues, so that’s also another solution that’s out there.” Officials plan to meet again next month.