Newsmakers April 4-17: Cash-only pot sales irk state, owners

Tax collectors have been almost as frustrated as owners of pot shops as they wrestle with how to collect taxes in an ancient way – cash only.

A lack of banking regulations has made paying taxes more difficult for marijuana businesses and just as problematic for cities to collect them.

Still, marijuana tax revenue has poured into state coffers. Despite the added tax revenue, concerns remain about whether the state has received its rightful share from the cash-only operations. 

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Many medical marijuana businesses have operated as cash businesses for years in Colorado, but cash-only transactions still put businesses at greater risk of being robbed.

The U.S. Treasury and Justice departments issued recent guidelines to increase the availability of financial services to marijuana businesses, but banks felt those advisories did not go far enough in addressing their concerns.

Mark Bower, chief financial officer for Home State Bank, told BizWest he would like to do business with marijuana dispensaries. If he did so, however, he would be violating the Bank Secrecy Act.

“While the Department of Justice said they weren’t going to prosecute, it doesn’t mean that the (Federal Deposit Insurance Corp.) doesn’t have all of their power and authority to fine us and put us in jail,” he said. “It’s going to take legislation at the federal level to fix this.”

Erica Freeman, co-owner of Choice Organics, Larimer County’s first retail marijuana store, agreed that federal regulators need to address the situation.

“A cash-only business is ridiculous,” she said. “There are many, many, many stores that can’t even pay their own taxes because they have to have a bank account to do it.”

UPDATE

Colorado has since granted a charter for the first financial institution to serve the marijuana industry, The Fourth Corner Credit Union.

The Colorado Division of Financial Services issued the charter in November to The Fourth Corner Credit Union, which could open in January.

“For now, this has at least the potential to present Colorado with immediate relief,” Skyler McKinley, deputy director of marijuana coordination for Gov. John Hickenlooper, told BizWest.

However, before the credit union can open permanently for business, action is also required by the National Credit Union Administration and Federal Reserve.

Fourth Corner must get a master account from the Federal Reserve and insurance from the National Credit Union Administration. Fourth Corner can operate until the NCUA makes a decision on the latter.

Attorney Mark Mason, an organizer of Fourth Corner, said the credit union administration review could take as long as two years.

The Associated Press contributed to this report.