The dangers of a multi-million dollar cash business

Cannabis companies struggle to maintain and maintain banking operations while facing the dangers of having large amounts of cash at their disposal.

Because of the status of cannabis as an illegal substance in the United States, many banks don’t want to take the risk of accepting weed dollars and risking extreme penalties or even closure.

And while some businesses eventually find banking, many cannabis business owners deal with huge sums of cold hard cash every day. Not only is it extremely inconvenient for anyone trying to keep a legitimate business going, but it also puts the lives of cannabis business owners in extreme danger, highlighting one of many major problems with the federal cannabis ban.

Congress introduced the SAFE Banking Act of 2021 to provide secure access to banking for cannabis companies. The bill contains wording prohibiting the federal government from penalizing banks that take money from cannabis companies. It would also allow banks to provide loans to cannabis companies.

But while lawmakers like Senator Cory Booker struggle to ensure that banking law adequately takes social justice into account before it is passed, the hyperlocal dangers of running a cash cannabis business remain.

The cost of banking in cannabis

To gain an insight into the logistics and dangers of running a multimillion dollar cash business, Leafly spoke to Charles Ball, President and Chief Financial Officer of Ball Family Farms, California.

People like Charles need to have hundreds of thousands of dollars in cash with them, along with buckets of change, so they can keep track of every penny that goes in and out of the store.

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“Imagine you have to do everything in your life with cash and that’s it. You don’t have a debit card; You don’t have a checkbook; You can’t do anything online, just cash. A contractor comes in, an electrician doing $ 60,000 worth of work. You must have $ 60,000 worth of cash with you. It’s daunting, and you have to have systems on systems on systems, ”says Charles.

The helmsman comes

As soon as the operating costs are clarified, taxes will apply. The IRS only accepts cash on very limited terms, and you don’t have a bank account so writing a check is on. So how do you pay taxes as a cannabis company?

“They have federal and state taxes and insurance policies [to pay.] They don’t take cash. If you go into the federal system and try to pay your employees’ federal taxes with cash, they will say no. You can submit two payments per month and it must be less than $ 2,000. If you’re doing any type of payroll, taxes can easily be $ 10,000 plus. The only other option is to put it in a different account, but that’s money laundering, ”says Ball.

To pay their taxes, Ball Family Farms was only allowed to send $ 4,000 a month in payments to the government. It put them in a position where they had a rolling balance of taxes due, which comes with extreme penalties. The company is currently negotiating with the IRS to pay the fees equal to the total tax liability plus 25% (!!!).

Charles relates how he once went to a Los Angeles City Council tax meeting.

“I asked her, ‘If we pay you cash, where are you going to put your cash? You don’t just put it under a mattress. ‘ Her answer was ‘next question’. I even offered, “I know you have a bank account, can you just tell this bank to help us?” They say, ‘Next question.’

Imagine having millions of dollars in the city that is your way of life. The stress, the fear, the everyday fear. Knowing that any moment you are a robbery away from ruining your business, or a kidnapping from tragedy, or a bullet away from being out of this earth because you grow weed as a profession?

It’s terrifying, and it’s real life for a lot of the people behind the companies you buy weed from, and even the stores you buy weed from.

“My greatest fear would have been if people thought the money was in my home. My children live there, but I’ve never had any problems, thank God. “

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Protecting a growing cash business

To protect their assets before they went into banking, the Ball Family Farms took advantage of safe houses across the city. They had three or four at any one time. The only people who knew where they were were Charles and the brand’s CEO, Chris. Sometimes they even hid the locations from each other so that no one had the location of all the cash.

But that was just one of many security systems Ball had put in place over the past four years before finally finding banking in 2021.

Charles explains, “We had several safe houses. We would never put all of our money in one place. We made sure it was heavily secured. Most people understand that cash is a cash business, hence some of the precautions I would personally take: Never drive straight from work to the safe house; never carry too much cash with you; Make sure I take specific routes to the different safe houses, etc. “

How banking helps cannabis business owners

After going door-to-door to different banks for four years, Ball Family Farms finally managed to get a bank account. But Charles says it needs a little help from one of her partners.

“I got in touch with this person and he said, ‘If you all have your records and you can show the bank that you are real and follow everything you do, you may have an option. ‘When we turned it in, they said,’ Oh, you’re doing everything according to the rules. ‘ Since our practices were already geared towards legitimacy, it was easier for us to [get the bank account]. “

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Ball Family Farms is just one of the very few companies that achieve this goal, and it still brings a whole host of new challenges. They are subject to monthly fees of thousands of dollars on top of the cost of running a successful cannabis business.

The real tax on cannabis possession

Regarding the additional fees banked on cannabis companies, Charles says, “It’s not cheap. They speak of a few thousand to have that account per month … but the benefit of having a bank is worth it because now we can look at various loans and the like. It’s definitely not a traditional banking business, but I don’t have to carry cash anymore so I’m not complaining. “

Even if you no longer have to carry cash around with you, the fear and stress of the past few years remain.

“Even now in the banking business, there is a certain fear. It’s not about what [burglars] get, it’s about what they think they are going to get. I keep thinking, ‘What if someone thinks I have cash left?’ I can’t let my vigilance down because at some point some idiot might think this is the one. ”

“You are constantly wearing out and you have to keep thinking, ‘Damn it, I wish I could just be normal.’ It’s a constant mental wear and tear and the only thing that can hold out is to understand that hopefully there will be an end to some kind of banking service. “

Dante Jordan

Danté Jordan is a former member of the Leafly Subject Matter Expert Team and is currently a freelance writer, video producer, and media consultant specializing in cannabis culture, strains, products, education, and everything else related to this little green flower. Contact him at smokewithdante on Instagram or datenetworks (at) gmail (dotcom). His website is www.dantejordan.com.

View article by Dante Jordan

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