An exterior view of the OG Collective in Cathedral City, California.
Scott Lambert
Co-Owner
The OG Collective
Cathedral City, CA
There are so many different factors to prepare for as an industry emerges from gray market to legitimate business. Some are obvious, but others will certainly come as a surprise. I wanted to use this month’s column to cover two different, yet very important, concerns in the California cannabis industry.
Banking is a very obvious and important concern that the state of California must quickly remedy for the sake of all involved in the cannabis market. There are absolutely no doubts that the full legalization of cannabis within the state of California will change — and probably become — the face of the entire industry. It will be responsible for billions of dollars being dumped into the economy and for millions of dollars in tax revenue being generated for both local municipalities and state coffers.
With that being said, cannabis companies cannot legally put their proceeds in a bank account. They cannot wire funds or proceeds to investors in other states. There are companies I know of personally that do more than $100 million a year in revenue, all cash. Not only does this restrict the type of investors that cannabis businesses have access to, but it’s obviously incredibly dangerous for a business owner to be in possession of that amount of cash. You are a target every day for being robbed or murdered. A dispensary owner in Los Angeles was recently shot and nearly killed in his home.
One has to believe that the government would realize that it is creating an extremely dangerous environment for legitimate cannabis entrepreneurs. Since the FDIC prevents banks from wanting to do business with cannabis companies, California needs to step in with a state-chartered bank or credit union. And the state needs to do that immediately.
The taxes being imposed upon legitimate cannabis entrepreneurs in California are another factor that must be monitored very closely. Everyone within the business realizes the size of the black market in California, specifically in the Los Angeles market. Unfortunately, there are going to be taxes as high as 35% of gross proceeds for licensed dispensaries. In other words, if you make $100,000 a month you automatically surrender $35,000, before expenses. The retailer has no other choice except to pass these costs on to the consumer. Unfortunately, consumers in California have limits as well.
If you live in the valley in Los Angeles and you’re used to paying $35 for an eighth of high-quality indoor flower, are you going to feel comfortable paying $50 to $60 for that same product? There are more than 1,000 illegal delivery services in Los Angeles; why not call them? Los Angeles really has its hands full in wrangling in the massive black market. And that’s just one city.