Tracking Finances, Writing Off Expenses Could Be Tricky For N.H. Pot Dispensaries
New Hampshire’s first medical marijuana dispensaries are getting closer to opening.
Officials in Plymouth, Lebanon, and Merrimack have been holding hearings, gathering public input on proposals to locate dispensaries in those communities.
But federal law and tax codes could complicate things for the companies that will run the state’s dispensaries and marijuana grow centers.
Jeff Feingold, editor of the New Hampshire Business Review, joined NHPR's Morning Edition to talk about this issue.
What are the major challenges these dispensaries will face?
Besides all the obvious regulatory issues they’re facing in New Hampshire, there are issues that are of big concern in the back of their minds that involve federal regulations and federal law.
There was a court ruling on the west coast involving a California dispensary. The judge ruled that because federal law does not recognize the legalization of marijuana in any way, shape, or form at this point, dispensaries are not allowed to deduct regular business expenses like employee wages and benefits. Those are things regular businesses can do and really does complicate things as far as how you’re going to write off all your expenses.
There’s also the issue of the IRS, which has been ruling against these dispensaries, saying that they can’t deduct business expenses, but they can deduct the cost of the goods sold. These are a confusing set of rulings that they’re dealing with that really does complicate the way they’ll have to do business.
It sounds like there’s still resistance from the banking industry, as well. What will that mean for the state’s dispensaries?
That might be the most difficult thing for dispensaries to deal with. It turns out the banking industry by and large is just not willing to deal with these businesses, whether it’s complete legalized marijuana, or just medical marijuana. Without access to banking, that means they can’t get things as basic as a checking account. Without a checking account, you can’t keep track of your expenses very well and the IRS certainly doesn’t like that.
It’s an all-cash business.
Exactly, and the IRS frowns on that kind of stuff.
Once these dispensaries are up and running, what will be the impact on the patients in New Hampshire?
That’s a good question because I think at some point they’re going to have to say dispensaries are going to provide the service. The problem is going to be in the long haul, how sustainable is this business model when you can’t deduct your expenses and you’re dealing with the IRS cracking down on you and you don’t have a bank.
In the short term, it will be beneficial for these patients who have been waiting for a long time for this program to come on line. But the question is what will happen in the long term. One of the applicants is expecting business of $3 million to $5 million a year. That’s a lot of money and a lot of expenses involved in that. There’s no way to write any of those expenses off.