Marijuana businesses have been unable to access financial services such as deposit accounts, cashless payments and loans since legal sales began in America. This is mostly due to the controversial plant’s classification as a Schedule I controlled drug, and it has had wide-ranging consequences on both cannabis businesses and federal authorities.
Players in the cannabis space are forced to transact on a cash-only basis, increasing their chances of robberies and making it difficult to account for and pay taxes. Furthermore, federal authorities, the IRS specifically, don’t often receive taxes that are due, and when they do, it is usually in large amounts of cash.
For quite a while, stakeholders, drug reform activists and lawmakers have urged federal authorities to allow cannabis businesses to access banking services. Recently, a top IRS official joined the growing number of figures that support banking services for America’s state-legal cannabis industry after she claimed that cannabis banking reform would ease the taxman’s work.
The IRS would like to get paid, IRS official Cassidy Collins said during an event hosted by UCLA’s Annual Tax Controversy Institute, and granting marijuana access to the banking system will be a big help. As it stands, marijuana presents a “special type of collection challenge” since the plant is federally outlawed and mostly stuck to cash-only payments that make it harder for the federal agency to receive taxes from cannabis businesses, Cassidy says.
She notes that the cash-only payment crisis can be attributed to two things: customers that are avoiding a paper trail that shows they purchased cannabis and banks that avoid working with cannabis businesses due to fear of reprisal by the federal government. Fortunately, lawmakers have introduced cannabis reform bills to give the industry access to banking services, and one of them has made headway.
Cassidy, a senior counsel in the IRS Office of Chief Counsel, says that while her views on cannabis banking may not represent the IRS’s or her own opinion, it would make the agency’s job of collecting taxes a lot easier. The Internal Revenue Service’s main objective, after all, is to collect taxes, and any legislation that eases the agency’s efforts is welcome.
Currently, cannabis business operators have to visit IRS tax assistance centers, which accept cash payments greater than $50,000. However, Cassidy notes that an operator will likely spend some time at the center because the federal employee has to check and double-check payments. The agency wants to work with companies in the cannabis space, regardless of the plant’s status with the federal government, to ensure it gets paid the taxes owed. Should lawmakers finally pass cannabis legislation, both cannabis companies and the IRS stand to benefit.
Cannabis banking reform will not only benefit the IRS but will also remove a major bottleneck faced by the entire marijuana industry, including sector players such as Hero Technologies Inc. (OTC: HENC).
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