The Internal Revenue Service (IRS) paid a consulting company $1.7 million for help processing the large cash tax payments coming from legal cannabis businesses, Quartz reports.
The cannabis industry continues to struggle with a lack of banking services. And now, with ten states having legalized adult-use cannabis and 32 with some kind of medical cannabis allowances, even the IRS is struggling to handle the industry’s cash flow. Cannabis companies paid $4.7 billion in tax payments last year alone, mostly in cash.
Notably, the IRS has not only done little to help — but it was also charging cannabis companies an extra 10 percent on their taxes for paying in cash until a successful lawsuit forced a change in 2015.
The current system is inefficient. Cannabis companies are required to schedule an appointment with a local IRS office, tote their stacks of cash down, and have them counted in a secure space while at least two IRS employees watch the entire process. This is, of course, after having paid all employees and other debts in cash as well.
The IRS hired The Mitre Corporation to help with the cash problem. A government spending report shows that the IRS has paid $1.7 million to the company for help with “large cash payments for processing cannabis federal taxes.” Denver accountant Jordan Cornelius speculates the payment is for streamlining the current process of accepting cash payments and not for physical accounting services.
Cornelius said that, while many in the cannabis industry expecting banking services to be “right around the corner,” the IRS contract casts doubt on that. Though he also wondered whether it was wise to be paying millions to a consulting company as a band-aid instead of spending that money on creating banking services for the cannabis industry.
Others, like Henry Wykowski who represents California dispensaries, agree that the cash system is irrational.
“The stupidest thing these guys could do is keep cannabis out of banking. If anything, they should be wanting to monitor the cannabis industry instead of forcing it to become further entrenched in the underground where it’s been, and that makes it much more difficult to regulate and control.” — Henry Wykowski, a cannabis industry attorney, via Quartz
The recent Democrat takeover of the House of Representatives and the removal of cannabis opponents like Pete and Jeff Sessions do cast a hopeful light on potential near-term solutions for the cannabis industry’s banking woes, even if the IRS is not optimistic.