Of all the pains involved in operating a legal cash business, one of the more unpleasant may be hauling loads of cash to a government building to pay your taxes. As a result of extremely stringent limitations and fees placed on cannabis businesses who use banks, many just choose to go it alone and operate an all cash business. In fact, about 70 percent of cannabis businesses don’t use a bank at all, according to a recent report.
There are many reasons why it sucks to operate without the benefit of a bank: the time it takes to count and recount all your cash, the lack of free pens, and also, not least importantly, the fact that you are much more likely to get robbed.
Last year the Associated Press detailed the nail-biting experience of having to transport tens or hundreds of thousands of dollars in cash to a government building in order to make a tax payment. “I find myself looking in my rear-view mirror hundreds of more times than I usually would in just normal traffic, making sure that I’m not being followed,” said one dispensary manager about his routine cash deliveries to City Hall.
Given all that, it’s pretty obvious that many cannabis businesses would be happy to find a new way to do business. And, it turns out, so would the IRS.
As reported by High Times, the government agency is “overwhelmed” by cash payments from cannabis businesses. In order to process the many billions of dollars in cash from the industry, the IRS has had to contract out the actual counting a consulting firm. The firm’s fees in turn eat up $1.7 million in cannabis tax revenue a year.
Beside the counting, there’s the fact that cash businesses can’t electronically file their taxes. The IRS states that processing tax filings on paper costs nine times as much as processing those filed electronically.
So it kind of seems like everybody could use an easier solution. Things actually have gotten a little better in recent years. Up until 2014, the IRS placed an additional 10 percent penalty fee on cannabis businesses who paid in cash, which they’ve since withdrawn. Maybe soon they’ll go the extra mile and create a system where cannabis businesses don’t have to be afraid of being shot every time they pay taxes.
Photo via Flickr user Hloom Templates