On October 24, I attended the first NJ Cannabis Conference at the Forsgate Country Club (Monroe Township, NJ). Among the 300 attendees, there were a few law firms and attorneys present, but only a handful of accountants. There were vendor tables for a host of service providers to the cannabis industry. The speakers and panelists were quite informative.
The fact that this conference happened here in Jersey is proof that the cannabis industry is growing here, not to mention elsewhere. Currently, 29 states and the District of Columbia permit medical use of cannabis. Nine states and the District of Columbia permit adult recreational use of cannabis. Under current federal law, interstate commerce is prohibited since cannabis is a Schedule 1 drug. Therefore, each state develops its own laws, regulations and compliance standards.
The cannabis business started with medical usage for patients who receive relief from smoking or ingesting products from the cannabis plant. Recreational use is expanding in each state as the respective legislatures address their constituents’ demands.
NJ’s Compassionate Use Act
New Jersey is new to this field and is currently concentrating on medical usage only. New Jersey passed the Compassionate Use Medical Marijuana Act (CUMMA), specifically to help those patients that receive relief from cannabis use. There are a large number of firms applying for the few dispensary licenses to be awarded. The financial investment required to start a Cannabusiness reach into the millions of dollars.
The current New Jersey legislation has an integrated license to cover the four classes of business operations: Growers, Processors, Wholesalers, and Retailers. There is pending legislation to change this law so that there will be four separate licenses, depending on the type of business operation.
There are many issues involved with this new industry:
• Federally charted banks are prohibited from doing any business with companies involved with the Schedule 1 narcotic. The federal government uses the Financial Crimes Enforcement Network (FinCEN) to monitor any transactions that could be in violation of the law.
• In February of 2014, guidance was issued regarding doing business with cannabis entrepreneurs. Banks are required to file a Suspicious Activity Report (SAR) for any transaction which is $10,000 or more. Form 8300 must be filed within 15 days of receiving the cash.
• The Internal Revenue Code does not permit any medical deduction for the purchase and use of cannabis.
• Employers are also prohibited from deducting this expense if their health care insurance provides this type of coverage.
• Business issues of banking (including the growing use of crypto-currencies), finance, bankruptcy, mortgage lending, casualty and liability, loss and theft, and other insurance issues are yet to be addressed.
• Employer and employee legal responsibilities also need to be addressed and regulated.
These and many more issues will need further legislation and regulation. While the cannabis industry will no doubt expand, the New Jersey legislature needs to move forward in meeting the needs of the business entrepreneurs and medical patients requesting this alternative therapy.
Services for the cannabis industry
Steinberg Enterprises, LLC., can provide comprehensive accounting and tax services to Cannabusiness entrepreneurs to help them develop internal financial reporting and control structures to meet both federal and state regulatory and tax reporting requirements. We will work closely with legal representation and other business and financial organizations to ensure that entrepreneurs meet their tax reporting and filing regulatory requirements.
If you have questions or wish to discuss any of these issues further, just give us a call at 609-443-0469 and we will gladly help you.