Why is it important?
On December 04, 2018 California’s Senate approved Senate Bill 51 (35-1). This piece of legislation would allow marijuana businesses to bank with state-charted banks and credit unions, and with the cannabis tax reduction bill now off the table,relationships with banks will be more important than ever.
In order for the cannabis industry to continue in the right direction, providing essential financial services is key. To the benefit of regulatory committees, we move away from a predominantly cash based business, making auditing easier.
What is the Senate Bill 51?
In November 2016, the voters of California helped pass Proposition 64: the Control, Regulate and Tax Adult Use Marijuana Act which authorized recreational use to specified limits. However, cannabis still remains illegal under federal law. As a result of the immoral scheduling of cannabis as a schedule one drug major financial institutions have been weary of doing business with the cannabis industry.
This status not only bars cannabis businesses from depositing income, but also from engaging in other banking-related activities, such as thrifts or credit unions. Cannabis’ status as schedule one also keeps states in conflict with federal law leaving cannabis businesses unable to open and use checking accounts or even make electronic payments. With the cannabis industry booming the need for financial services for the industry is more important than ever.
Dr. John Oram—founder and CEO of vertically-integrated, Oakland-based cannabis company, NUG, made himself available to discuss these current events and more. Having been in the CA cannabis industry since the early 2000s, Dr. Oram can attest to the difficulties of not having easily accessible banking in the cannabis space. Moreover, he has seen this issues continue to strangle the industry by poor regulatory standards, slowness of licensing and the lack of available outlets.
NUG CEO/Founder Dr. John Oram:
“If licensed cannabis companies are to compete with the black market and succeed in the long term, we must have the proper financial tools in place in order to run our businesses efficiently. Without the commercial banking services that are accessible to other industries, legal cannabis businesses are dealing solely in cash, making it difficult to navigate tax, payroll, deposit, and loan matters.
Cannabis banking reform is not only necessary to ease these burdens on our industry, but also to help distinguish legal businesses from illegal operators and ensure the safety of our staff members and consumers. I’m pleased to see that California is leading the charge on this issue with its cannabis banking bill. If the legislation passes, it will be a big step in the right direction that will hopefully lead to a change at the federal level.”
Given the failure of the Cannabis Tax Reduction bill, these issues will continue to hinder the development of cannabis sales. John has long spoken out about the regulatory issues stunting the growth of what should be a much more successful CA legal cannabis market. He sites many factors that led to a a decline in the industry performance. Here is a recent clip of John.
Primarily, the tax bill would have reduced the state’s excises tax on cannabis from 15% to 11% and suspending the cultivation tax for three years giving the industry a temporary reprieve form high taxation and allowing businesses to grow.
The bill requiring municipalities to allow cannabis operations was advanced to the floor. While some may argue this infringes on local governments ability to decide what business are permitted in cities and counties, it also ensures legal markets will compete with black market cannabis.
Hefty taxes, prohibitive regulatory requirements and market reduction continue to contribute to the black market. With fewer operations than before, smaller operations are finding it tougher to break into the industry. Finding practical ways to expedite licenses and giving tax reprieves will continue to be hotly debated in California, with the rest of the country keeping a close eye on the progress.
NUG, Inc. is a premier, state-licensed, and vertically-integrated California cannabis company with significant projected revenue growth. From its patented cutting-edge technology, to its award-winning branded products and dedication to equity and community involvement, NUG’s pioneering leaders have established an industrywide standard for handcrafted, seed to sale cannabis production. Founded in 2014, NUG continues to expand and diversify its portfolio, with a key focus on manufacturing, distribution, and branding. The company operates one of the largest cannabis manufacturing and processing centers in California, which produces more than half of the most popular concentrates sold in the state. NUG is constantly innovating with world-class R&D, state-of-the-art cultivation facilities, one of California’s largest wholesale cannabis distribution operations, and the new, unparalleled NUG retail store experience.