IRS FLOODED WITH CASH PAYMENTS FROM BUSINESSES IN THE MARIJUANA INDUSTRY
- November 16, 2018
While all businesses based in the good old United States of America pay federal taxes through electronic portals nowadays, all state-legal marijuana businesses take a more old-fashioned approach when it comes to paying Uncle Sam. Instead of conducting electronic transactions, these pot businesses meet in-person with IRS offices. After arriving at a site, a company representative meets with two IRS agents, and the group counts large quantities of cash (in tens or hundreds of thousands of dollars). So, you can understand why some businesses are a bit rattled when it comes time to pay up. Not only is this an overly anxious activity for pot businesses, but this is also a clear representation of the budding cash problem due to marijuana prohibition at the federal level. So what else has been going on for the marijuana billionaires and their cohorts? Let’s take a closer look and find out.
$1.7 Million for Cash-Counting
Although groups at the state and local level have attempted to provide financial aid to marijuana businesses, one McClatchy report has estimated that 70% of companies in this sector do not directly work with banks. Instead of taking this action, these businesses gather customer payments in cash and pay taxes (and employees) in cash, as well. At this same time, however, these pot businesses have to find ways to keep all those hard-earned dollars safe. So you can imagine why theft is such a major issue for members of the marijuana industry. In fact, the Los Angeles Sheriff’s deputy was recently charged with armed robbery and appeared in court (due to targeting safes in a marijuana company’s warehouse).
Also, consider that, in 2017, legal marijuana companies paid an estimated $4.7 billion in taxes, and most of those payments were direct cash transactions.
No Pot Bags for Us
Until a marijuana company sued and won its case back in 2014, the IRS issued a 10% penalty on any marijuana businesses that paid in raw cash. A year later, in 2015, the IRS finally eliminated this fee but announced they would prefer businesses to make further payments via credit card, check, or electronic portals. Why is this the case? Overall, processing paper tax filings is 9 times more expensive than electronic versions.
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