The cannabis industry has made impressive gains and developments in the labour market. These successes varied and showed positive outcomes in various fields by legalizing the conditions for buying and selling cannabis, which is favorable by all standards and in all areas such as the economy, jobs, and medicine and ending illegal markets.
Taxing hemp and marijuana is a golden opportunity for accountants and bookkeepers.
Many experts believe that the direct reason for the growth and development of buying and selling cannabis in this considerable way was the result of the unfortunate events that the whole world experienced in the past year, due to the Corona pandemic and the quarantine that the world has undergone and stayed at home for long periods. For a year or a little more, most employees have been working remotely from home to ensure their safety and the safety of others. So cannabis has become the best and first choice for them to spend time at home and cope with everyone's stress and help withstand the bad news that's been around for a year and a half and is still going on.
Emphasizing the importance of the move, Derek Davis said, "Cannabis really grew during COVID — there was a great product-market fit if you're sitting home all day, cannabis is a great product for that. cannabis companies are doing really well right now." Derek Davis is the founder of GreenGrowth CPAs, California, USA, a company that serves cannabis customers across the United States. And he added referring to the risks that may result from this step “Banking’s obviously the most apparent issue because it’s really challenging to run a $15 million company all in cash, There are a plethora of issues that come with that — theft, misallocation of funds, misplacement of funds, running payroll in cash — it’s completely absurd.”
In addition, Andrew Hunziker, a certified public accountant, CEO, and co-founder of Dope CFO, which provides accounting services to cannabis companies and teaching Bookkeepers and accountants how to serve the burgeoning industry, is a positive step in ending the illegal marijuana market. "It's positive almost every way you look at it — the economy, jobs, medicine, ending illegal markets, even social justice, I think we will all look back on 2020 and say, 'What a mess of a year — it's been pretty bleak, but this is a little bit of a bright spot."
Gretchen Schmidt, JD, noted the faculty program director for criminal justice programs at Excelsior College and one of the leaders behind the online school's new Cannabis Control Certificate. It is possible, and there is some speculation that during the pandemic last year and the continuing crisis with us this year that the cannabis companies benefited greatly. And she said that the most significant benefit came through the economic impact payments of $1,200 that the federal government distributed to payers. Taxes are early in the pandemic.
She declared, " The industry has really fared well as a result of the pandemic, starting with being deemed an essential business, And drive-through and curbside pick-up services were “a big win” for the industry, suggesting that cannabis might prove to be somewhat recession-proof, much like alcohol and tobacco.
You did see a spike in sales as those checks were being passed out," she said — they were also shut out of federal stimulus funding such as the Paycheck Protection Program because the federal governments consider marijuana an illegal drug. Operators didn't have an emergency fund, and you should have six to eight months of cash. that's a significant barrier, particularly if you don't have banks to get loans from."
Having professional accountants and bookkeepers may prevent the collapse of the cannabis industry after its boom
In these developments and growth in the cannabis and marijuana industry, account problems may increase for companies working in the service of cannabis customers, as increased pressure on demand may generate large numbers and complex calculations that may cause many problems in the workflow of those companies. He will not be able to solve those. The difficulties are only a qualified and professional accountant. In this context, Davis explained, warning of some problems, “They’re always having cash-flow problems, and they never pay their bills on time,” he said with a laugh. “So when I see firms getting into space, I'm always thinking, 'Are you sure you want cannabis clients?' They're always a headache, and their records are second only to fifth-graders."
He continued, "In the early years — 2016, 2017, 2018 — we were getting a lot of unlicensed clients, but we're now at a point where they're usually more sophisticated, when we were first starting, one of the hardest things. For me, doing as a practitioner was to convince people that paying taxes was in their best interest. 2018, a lot of institutional money has gone into space, and an institutional investor will often make you hire a CPA firm, and that's helped a lot."
Increasing demand for cannabis in the future
It is expected that the demand for cannabis will increase in the next few years. After taking a significant positive step in this regard, some other states will likely open up to legalizing the sale of cannabis so that the black markets and illegal markets will disappear, and thus work will increase. The accounts will become more complex, making the accounting market And bookkeeping active in the coming period, and of course, the demand for accountants and bookkeepers will increase. Schmidt emphasized this idea as well, noting that even though buying and selling have become legal, there is still a stigma around the factory and industry in general. The continued illegality of federalism makes it more challenging to break this stigma, and reputation haunts the factory everywhere. However, she expects to see more states open up to cannabis.
“Legalization is going to continue — it’s not a matter of if, it’s a matter of when; already, more than half of the states have some form of legalization, and that isn’t a trend we see slowing down or stopping. It’s too big of the industry to close down or for that to stop,” she said.
She added, “It means a more straightforward set of laws and policies — right now, it’s wildly different from one state to the next, and even from one city to the next, the more states that adopt legalization in one form or another, the more it is going to help. Right now, we don't have a great model out there — as more states legalize, they're learning from earlier mistakes, and with every state that legalizes, we seem to be getting more of it right."
Schmidt stressed that people should learn to deal with the current situation and not look at the factory or customers as doing something illegal, referring to the importance of taking educational steps towards the public to break the industry's stigma. She said, “You have to understand the plant.”, the history of legalization, the complexities of the regulatory landscape, and more,” she continued. "It's the people who didn't understand the plant and its history that don't make it in this industry."
Nine states currently sell recreational marijuana
Nine states currently sell recreational marijuana and hemp, and several more states have legalized marijuana but are still creating the retail and tax structure. Here are the states that presently sell recreational marijuana:
There are some other states where the sale of marijuana has become legal, but the movement of trading in the markets has not started yet:
Due to the current situation and the entry of the marijuana industry into the market, the tax laws are not yet stable. They are constantly evolving to suit the continuous development of the industry. As a result, each state taxes marijuana differently. In some states, you'll find a consumer sales tax and farmers a selective tax. Some other states charge a tax based on weight or potency. Dealing with marijuana taxes is a bit like sales tax, where the consumer pays a certain percentage above the retail price, and then the state takes that percentage from the retailer. The retailer sets the product's cost according to the tax rate imposed to cover this percentage specified by the state. Or it may be treated as taxes on cigarettes, with an additional fee charged per pack. Concerning hemp, the tax is levied according to the weight of the plant rather than the can. For example, California charges $9.65 an ounce on marijuana flowers, $2.87 an ounce on marijuana leaves, and a $1.35 an ounce tax on fresh plant material. This tax is passed on to the consumer as well. Potency-based taxes are levied in the same way as alcohol taxes, where the tax increases as the effect of alcohol on alcoholic beverages increases. With marijuana, potency depends on THC levels. The higher the THC level, the more potent the product. This type of tax is not imposed in any state except for Illinois, which is the only state that has adopted it in estimating consumer taxes. More robust products (those with a THC concentration greater than 35%) are taxed 25% higher. The percentage of taxes levied decreases with the strength of the product. But don't think that Washington is the most expensive state to sell marijuana. It costs $35.42, including taxes. That's $10 less than people are paying in Alaska, the most expensive state to buy marijuana in. However, Alaska is the most expensive place to purchase the product. In Alaska, consumers pay $45 per eighth ounce. Nevada comes in next, where consumers pay $43 per eighth ounce. California charges $41, while Massachusetts and Washington sell an eighth for about $35. Colorado and Oregon are the cheapest states to purchase recreational weed in, where an eighth of an ounce sells for about $30. Here is an illustrative list of states with the highest taxes on marijuana:
- Washington: 35%
- Oregon: 17%
- Massachusetts: 10.75%
- Nevada: 10%
- Michigan: 10%
Obtaining a license to open a dispensary for the sale of hemp and marijuana
You can now apply for a license to sell marijuana legally. The application process is quite expensive, and it is usually extensive but not cheap. You are billed for the cost of obtaining the license as well as the additional annual maintenance fee for your cannabis dispensary. In some states, the number of licenses granted is limited, such as Washington State, to name a few. Once licenses have been distributed, a license must be purchased from the existing licensee due to the difficulty of obtaining licenses. The cost of buying a license in this way is prohibitive, costing up to 60 thousand dollars.