By James Tehrani
Get a whiff of this: People continue to debate why April 20 has become such a celebrated date in the cannabis world as Bob Dylan-, Grateful Dead-, and Crosby, Still, Nash and Young-related theories abound.
But the one thing that isn’t debatable is that the headaches related to payroll issues in the cannabis industry have not gone away.
Still, the legalized cannabis industry is growing, no pun intended. Statista estimates worldwide spending on this budding field will reach $33 billion by 2025, which, by the way, is the same estimated total that went up in smoke in the concert industry in 2020 because of the pandemic.
In the past few years, we’ve started to see more states legalize marijuana, including for recreational use.
This week, for instance, the first seven “alternative treatment centers,” as they are called in New Jersey, opened, and the first cannabis “consumption lounge” welcomed customers in Las Cruces, New Mexico. Until that lounge opened in the Land of Enchantment, New Mexicans were only allowed to use marijuana in their homes. The lounge is about an hour north of the western edge of Texas, and since the Lone Star State doesn’t allow cannabis use, except for specific medical conditions, it’s likely that “pot tourism” will come into play.
There are currently 19 states that allow marijuana use for both medical and recreational purposes, and many others that allow it for medical reasons only.
Focusing on Federal
Even though the U.S. House of Representatives recently passed a second version of the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act, it remains unclear when the Senate will vote on the act or when a Senate version of the legislation will be released.
Similarly, the Secure and Fair Enforcement Banking Act (SAFE), which would allow banks to work with cannabis companies as they see fit without having to worry about potential federal penal ramifications, seems like it might be a nonstarter in the Senate as well.
The difference between what some states will allow and what the federal government will allow is stark and confusing for consumers and businesses alike. As FindLaw wrote last year, “The problem is that, despite the liberalization of state laws across the country, federal law still treats marijuana as a controlled substance, just like cocaine or heroin. This conflict between state and federal law creates a situation where you could be charged with a federal crime for activities that are allowed by the laws of your home state.”
That said, unless the drug use is associated with other criminal activity, FindLaw explains, federal charges for individuals are still highly unlikely.
That might be a relief to most consumers, but since federal law still classifies marijuana as a Schedule 1 controlled substance—along with other drugs such as LSD and methylenedioxymethamphetamine (ecstasy)—it makes paying and receiving funds a challenge.
The problems with being a mostly cash business range from security issues related to theft to currency fraud and more. Also, without banking partners, smaller cannabis companies in particular will find it challenging to fund future growth.
Some cannabis companies have even turned to cryptocurrency to help alleviate the pressure, but the volatility of crypto's value and verification issues for accepting payment can be problematic.
Additionally, paying employees, compliance and even unionization can be tricky problems for cannabis companies. There are an estimated 428,000 employees in the cannabis industry, which is about 33% more people in the field than in 2021. While treating workers as contractors in an attempt to avoid pay-related complications may sound ideal, it’s not always the best or proper solution. And while businesses may be able to pay workers in cash, that doesn’t mean they are allowed to ignore tax withholdings and such.
Figuring out a payroll solution is essential to any cannabis organization. After all, it’s always a good time to turn over a new leaf when it comes to improving these types of initiatives.
James Tehrani is EPAY's digital content marketing manager. He is an award-winning writer and editor based in the Chicago area.