By Ben Curren
As I began my marijuana point-of-sale company Green Bits, and talked with various marijuana retailers in Washington and Colorado, I was staggered by the number of retail horror stories they shared with me.
I talked to a retailer in Colorado whose budtenders had to go through a multistep, error-prone check-out process. The process ensured they complied with all of Colorado’s laws and kept regulators off their backs, but it also required employees to segment their inventory and manually update package IDs for each product.
I quickly found out that since both Colorado and Washington require retailers to report how much inventory they have on hand at all times, marijuana retail store owners have to make a hard choice — comply meticulously and risk unhappy customers and stressed-out staff, or face stiff fines and penalties from state authorities.
The overwhelming amounts of regulation marijuana retailers must labor under make this emerging industry a tough one in which to succeed, but technology can assist. Point-of-sale solutions out there will ensure that retailers can comply more easily, track inventory more readily, and stay out of trouble with state authorities, all the while giving the customer a pleasing buying experience.
Tax Compliance
Many U.S. states have been operating on shoestring budgets over the past few years, and are looking for new sources of revenue. Colorado and Washington are no exceptions, but their residents happened to vote in favor of marijuana legalization, creating an opportunity for the states to levy high taxes on a hot commodity.
In fact, Washington charges a 25 percent excise tax directly to the marijuana retailer for every marijuana-related product sold, a 6.5 percent sales tax, and various state and district taxes, as well as a statewide business and occupation tax.
Colorado charges a similar 15 percent excise tax on wholesale — but not medical — marijuana, as well as a 10 percent sales tax on marijuana products, a state sales tax of 2.9 percent and various local taxes.
As these two states pioneer legal retail marijuana sales, the pressure is on to accurately project how much tax revenue will be collected and actually ensure those funds make their way to state coffers. Retailers who don’t accurately track and report the amount of sales they’ve made and how much sales tax they’ve collected can be subject to fines or stiffer penalties.
According to the Colorado Department of Revenue, the state had collected more than $45 million in taxes from marijuana sales through August, the most recent month reported. That’s a whole lot of bridges, schools and roads, and the states lose out on that revenue if retailers aren’t remitting the correct amount of tax.
Technology that integrates inventory receiving and point-of-sale can generate reports on just exactly how much of each type of tax — excise, state sales tax, and local and district sales tax — each marijuana retailer has collected. This ensures they report and pay the right amount of tax to the state, and helps avoid headaches or audits later.
In mid-October, the Washington State Liquor Control Board released its first wave of violations, fines and warnings for marijuana-related businesses. The most common of the 41 violations were for improper tax reporting or payments. Of the 41 total violations, 30 of those were for “failure to submit monthly tax reports and/or payments.” Those businesses were given verbal warnings.
Inventory Management
Washington and Colorado highly regulate each retail establishment’s inventory, partially as a measure to collect the right amount of tax revenue.
Retailers must report when they receive a product from producers, when they sell something, and even when they lose an item through theft or spoilage. Failing to comply with regulations can lead to fines and penalties.
Adam Markus, of Station 420 in Union Gap, Washington, started using one traceability system, but he quickly ran into problems.
“Where I might have 50 strains, I would login to the system at night and see only eight. I spent hours on the phone with the Liquor Control Board and about four to six man hours every night making sure our inventory matched the system,” he said.
Trying to stay compliant with inventory reporting cost Markus time and money that was better spent serving customers and sourcing new products.
Integrating inventory with a point-of-sale system can ensure that all inventory — received and sold — is properly tracked, which can prevent a visit from state authorities.
Customer Service
In such a highly-regulated industry, marijuana retail store owners can find themselves spending most of their time trying to comply with taxes and regulations. But at the end of the day, happy customers keep this new industry afloat.
Some retailers used a web-based system to handle customers. Don’t see the problem? Imagine going to a store like Target and watching the cashier look up each product on the store’s website, then build a shopping cart for you. It led to slow checkout times, unhappy customers, and fed-up employees. Before Markus adopted cutting-edge point-of-sale technology, he would have up to 40 people in line at one time, he said.
Point-of-sale technology allows retailers to scan a product’s label and check customers out nearly as quickly as a grocery store clerk. It tallies taxes, reduces employee errors, and tracks every piece of inventory. Colorado retailers, who can sell loose marijuana, unlike those in Washington, are even able to use POS technology to print labels to accurately track each custom amount a customer purchases.
An integrated point-of-sale system uses technology to solve many of the biggest headaches plaguing marijuana retailers. By eliminating the headaches of tax compliance, inventory tracking and long checkout lines, technology can give marijuana retailers the freedom to get back to doing what they do best – thriving and innovating in this emerging industry.
Ben Curren is the CEO and founder of GreenBits.com, which creates point-of-sale and inventory management software designed for marijuana retailers.