It doesn’t matter how much money you make in the legal marijuana market. Some businesses owners who run state-licensed establishments in Oregon still cannot secure home loans. Since most home loans are federal, the government won’t lend to people working within a federally illegal industry. Here’s a look at how federal regulations complicate everyday life for profitable business owners.
More People Work In Legal Weed Than Ever
The legal marijuana industry just keeps on growing. For the U.S. and Canadian economies, this is largely a good thing. Some experts predict that marijuana could add $80 billion to the American economy in the next four years.
Not only is cannabis great for real estate—dispensaries and grows often use unused buildings—and tourism, but it’s creating a job boom. Some estimate that legal weed will create almost 300,000 new jobs by 2020.
Marijuana Is A Cash Business
But since marijuana businesses cannot participate in the banking system, most of their transactions, including paying their employees, must be conducted in cash. And without virtual currency, legal cannabis companies struggle to pay their taxes.
The federal government does not accept cash or money orders as tax payments. According to Zack Kohler, owner of Emerald Triangle Dispensary in Oregon, the government tried to fine him. “They want to fine me 10 percent on these checks for doing this,” he explained to Green Rush Daily, “even though there’s no way to get it into the banking system. If that’s not hypocrisy, I don’t know what is.”
To pay his taxes without a massive fine, Kohler had to reach into his personal savings. As many business owners struggle in the first years and can’t take a salary, filing taxes can be near impossible.
And getting to the point where you can take a salary can be more difficult than other industry. Since the federal government regulates all banks, they restrict which industries can qualify for loans. This means that you can’t get financial help to build or expand a marijuana business, nor can you deduct business expenses from your taxes. “This is most expensive start-up ever,” added Kohler.
People Building Legitimate Businesses Denied Home Loans
The federal government’s restrictions don’t stop there: some business owners looking to buy property can’t get a housing loan either. This is true in Oregon where tax compliant and financially qualified applicants who run cannabis business are being denied loans.
So far, every bank has rejected Kohler’s home loan application. Other dispensary owners suffer from the same harsh banking laws after they pour their savings into starting cannabis businesses.
Luckily, the same restrictions don’t universally apply to dispensary employees. One staff member now has a mortgage and another recently bought property. Anyone who has a pay stub from a dispensary can qualify for federal loans. But those taking the majority of the risk in the cannabis industry, those responsible for the economic boom, often cannot.
Yet despite the expenses piled on cannabis business owners, industry members like Kohler are still dedicated to marijuana. “It’s a bummer, about taxes and housing,” he explained, “but all it takes is for one person to sleep, stop having night terrors, not having restless leg syndrome anymore, and you’re like, OK, I can deal with this.”