By Garrett Rudolph
Nobody expected the legal marijuana industry to be easy.
After all, making a living by breaking federal law generally doesn’t come with medical benefits and a retirement plan. But I don’t think many people realized it would be this challenging, at least in Washington. Frankly, it shouldn’t be this tough, but as it stands, marijuana businesses must contend with restrictions and obstacles no other industry faces.
At Marijuana Venture, we’ve been chronicling many of the challenges ranging from legal to logistical for the past year. This issue, we expanded that coverage to address some of the flaws in Initiative 502 and Washington’s contradictory marijuana laws and how they are having a direct impact on local businesses. These are the factors that other industries don’t have to take into consideration. While doing research for this story, I started compiling a list of challenges unique to cannabis. By no means is this a comprehensive list, but I came up with 41 hurdles — in no particular order — that prospective business owners should be aware of before diving into the Green Rush.
1. Internal Revenue Code 280E.
2. Marijuana remains a Schedule I controlled substance.
3. No third-party transportation.
4. Most banks refuse to service the cannabis industry, even for businesses that are licensed by the state.
5. Steep excise taxes rather than (or in addition to) sales taxes that would be more business friendly.
6. Taxes, taxes, taxes. Aside from the back-breaking excise taxes, business owners have to deal with federal income tax, sales tax, B&O tax, local taxes and more. Washington and Alaska residents are lucky they don’t have to deal with state income tax; however, Oregon has the third-highest state income tax in the nation, according to The Tax Foundation.
7. Higher insurance rates.
8. Local bans and moratoriums.
9. Misinformation from opponents.
10. Competition with the largely unregulated medical market.
11. Competition with the black market.
12. Slow licensing process.
13. Residency restrictions.
14. Continually-changing rules.
15. Licensing fees.
16. Absurdly strict seed-to-sale tracking.
17. Electricity rates that seemingly target indoor growers.
18. Because everything about this industry (in a legal sense) is new, there are few established resources that would be available to other businesses, such as lobbying groups, trade associations, university research, banking services, higher education, etc.
20. Likewise, many ancillary businesses are relative start-ups, making it tougher to research a company’s history and reviews from past clients.
21. Strict marketing restrictions. No other industry faces limitations on the size of a sign hanging on the facade of a retail outlet, or limits print advertising to industry publications.
22. The inherent risk of being first at anything. It fits with the phrase, “Pioneers get slaughtered, and settlers prosper.”
23. No interstate commerce.
24. Testing regulations that are, in many ways, more stringent than those in place for farmers and food manufacturers.
25. The possibility of federal prosecution for any number of crimes.
26. The uncertain future of being part of an experiment that could be shut down by politicians or shifting public sentiment at any moment.
27. Increased importance on political activism. If you’re in the tomato business, no politician is ever going to be staunchly opposed to tomatoes. But if you deal in cannabis, you have to know where every potential commissioner, council member, mayor, senator, representative, governor, judge and president stands on marijuana.
28. Likewise, few politicians are going to be outspoken supporters of the cannabis industry.
29. Payment on terms is not allowed under Washington’s current rules.
30. Strict banking complications mean traditional lending services are non-existent.
31. Restrictions on all transportation via water or air.
32. Limitations on the number of total businesses licensed.
33. Limitations on how many businesses an individual can own.
34. Limitations on the size of each business.
35. Potential water restrictions, particularly from federal sources or agencies that collect federal funding.
36. The Green Rush mentality that has led to thousands of people attempting to enter the business all at the same time, some throwing massive sums of money around to ensure their success at what many believe will eventually be a multi-billion dollar enterprise.
37. That same mentality has spawned hundreds of support businesses looking to cash in. While most have great products and good intentions, the potential money has definitely attracted an abundance of businesses that aren’t trustworthy. It cannot be emphasized enough: Do your due diligence.
38. Rules that are being written by people that clearly don’t understand the cannabis industry.
39. No consignments to retailers.
40. Armed guards or employees adds a tremendous amount of risk of prosecution.
41. The lack of support from federal programs and agencies such as the Environmental Protection Agency, the United States Department of Agriculture, the Food and Drug Administration and others.
The list could go on and on, but even this tip of the iceberg shows the immense challenge ahead for those that choose to be daring.