Budding businesses can’t bank on marijuana: Cash-only trade raises fears Click here to zoom…

PORT TOWNSEND –– Every day, Gracen Hook takes stacks of cash from his medical marijuana businesses to a secret, off-site storage facility. 

He staggers the time to prevent potential crooks from picking up his habits.

“I’ve had to bring in a special team of people to count cash,” said Hook, owner of the Alternative Clinic medical marijuana dispensaries in Port Townsend and Port Hadlock.

For the North Olympic Peninsula’s legal marijuana industry — as elsewhere in the nation — day-to-day duties such as paying utility bills, taxes and employees include toting around stacks of cash since federal law prevents banks from providing them with business accounts.

“Until the federal government clears the way, I’m stuck using cash,” Hook said.

And since he can’t accept credit cards without banking services, all of Hook’s revenues come in cash.

Even a simple chore like paying taxes requires stuffing wads of cash in bags and driving them to the Department of Revenue in Tumwater.

“We obviously want to make it as simple as possible for these businesses to pay their taxes,” department spokeswoman Kim Schmanke said.

“But clearly, some of these businesses are unable to make electronic transactions because they don’t have bank accounts.”

Hook was willing to speak on the record about a problem plaguing all medical marijuana providers and which hovers over upcoming retail shops.

Although Washington state voters approved the use of regulated medical marijuana in 1998, several federal laws — the Controlled Substance Act, the Bank Security Act and the Patriot Act — make it illegal for banks to take money from marijuana businesses.

The federal Drug Enforcement Administration classes marijuana as a Schedule I drug, considered among the most dangerous on par with heroin, ecstasy and peyote.

“Schedule I drugs, substances, or chemicals are defined as drugs with no currently accepted medical use and a high potential for abuse,” the DEA says on its website www.justice.gov/dea.

“In essence, we would be laundering money as the law looks at it,” said Larry Hueth, president and CEO of Port Angeles-based First Federal.

“We would be breaking the law.”

In September, Bank of America announced that it would accept Washington state’s revenues from marijuana taxes, but banks are leery of accounts with pot shops.

Hueth said his bank has denied marijuana businesses accounts because of the risk of penalties.

“Until the federal government clears the way for us to legally accept money from these businesses, we can’t do it, or we’re at risk of several penalties, not the least of which is having that money seized,” Hueth said.

The problem became more drastic after Washington state and Colorado legalized marijuana for recreational use.

Colorado’s retail shops could open Jan. 1. In Washington state, marijuana later this year will be available for retail purchase in state-sanctioned stores by anyone older than 21.

Several other states are expected to consider legalizing recreational marijuana in 2014.

The number of states approving marijuana for medical purposes has also been growing. California was the first in 1996 and has since been followed by about 20 other states — including Washington — and the District of Columbia.

The state Liquor Control Board is allowing 10 retail stores to be sited on the North Olympic Peninsula, six in Clallam County and four in Jefferson County.

Growers and processors also will be licensed.

Some medical marijuana purveyors have been able to get accounts for their dispensaries, but only by not fully disclosing what their business is to the banks.

Hook said colleagues he knows in the area had accounts closed when banks discovered they were running pot shops, though they would not consent to be interviewed.

Running an all-cash business also presents its share of security concerns.

Time magazine reported last week on an unnamed California marijuana vendor who was kidnapped and mutilated by robbers who wanted him to lead them to a stash of cash they thought he had buried in the desert.

Sheriffs in both Clallam and Jefferson counties said the all-cash businesses prompt worries about potential robberies.

“That’s gonna be a real issue,” Jefferson County Sheriff Tony Hernandez said.

Clallam County Sheriff Bill Benedict, also concerned about the potential, said he knew of one robbery of a pot shop but that owners of medical facilities often opt not to report such thefts.

“They were advised by their attorneys to not even report it,” Benedict said.

“That leads me to think there may very well be other rip-offs that just haven’t been brought to our attention.”

As reported Thursday by Politico magazine, U.S. Attorney General Eric Holder announced that the federal Justice and Treasury departments are working to give a bit of legal cover to banks so they can deal with the legal marijuana industry.

“There’s — what, 23, 24? — states in which marijuana is legal in some form. Cash is not the way to do this,” said Scott Jarvis, director of the state’s Department of Financial Institutions.

While Holder told officials federal agents would not prosecute banks for dealing with pot shops, Jarvis said it still doesn’t make it legal.

“We’re getting closer to the goal post,” Jarvis said Friday.

“But this still doesn’t have the authority that an alphabet regulator like the FDIC would provide.”

Wake Up People…Marijuana Is Legal. Time to Regulate and Tax It.

Marijuana Is Legal. Time to Regulate and Tax It. 

Calling all pot-o-preneurs: In Washington state, where recreational marijuana is now legal for adults, political leaders are urging participants in this emerging industry to join the Rotary. Go mainstream. Be part of the business community.

 

We are just starting to see the first, hard details in the tricky balancing act of transforming an illegal business into a legal one, in Washington as well as in Colorado. With numerous state regulations and considerable watchdogging by the federal government, which still considers marijuana illegal, the big deal about legalization is that it may not be such a big deal. At least not right away.

 

In Washington, it now seems that tax revenue won’t be as plentiful as expected a little more than a year ago, when voters approved legalizing recreational marijuana. Seattle won’t be Amsterdam, with pot smoke wafting out of coffee shops. (No smoking in public, no selling in coffee shops.) Pot stores won’t be omnipresent.

 

In Seattle, starting in May or June, consumers will have almost two dozen retail outlets where they can find their herb of choice, with dozens more in surrounding suburbs. There will be up to 334 stores statewide. Even if that sounds like a lot (there are almost 700 Starbucks coffeehouses in Washington and they seem ubiquitous), some rural towns and counties might have only one or two pot shops.

 

“I think the hype about cannabis being legalized is huge, but the impact on society is not going to be as big,” said Randy Simmons, deputy director of the state Liquor Control Board. The pot law follows old liquor laws, which limited the number of stores and prohibited people under age 21 from buying in those stores. “There is a control factor that will take away from the image of a store on every corner and large pot parties in the park every day,” he said.

 

Hundreds of people showed up online on Nov. 18, the first day applications were accepted for licenses. They were Microsoft Corp. veterans, construction workers, farmers, pastry chefs, all hoping to grow or process or to open one of the private retail outlets that will operate a bit like — and, one hopes, not be as ugly as — those boxy, old-fashioned state liquor stores. And, according to the rules, no free samples allowed.

 

Washington will slap an excise tax of about 44 percent on pot by the time the consumer buys it in a retail store. But the state isn’t anticipating meaningful revenue from marijuana for a few years.

 

“We have to emphatically temper expectations of tax revenues,” said Reuven Carlyle, a Democrat who is chairman of the Finance Committee in the state House of Representatives. “This is completely art, not science.”

 

Colorado, which also legalized recreational marijuana in 2012, may get more tax revenue more quickly. Stores there opened on Jan. 1, and existing medical marijuana outlets are allowed to convert to selling recreational pot. Taxes will vary from jurisdiction to jurisdiction. In the Denver area, levies on the final product will be about 30 percent to 35 percent.

 

In Washington, experts conservatively estimate that the new recreational marijuana outlets, which have to start from scratch, will reach only 13 percent of the market in June, 25 percent a year later and 80 percent in five years. State-regulated stores have to compete with medical marijuana and black markets.

 

Washington-grown retail giants such as Costco Wholesale Corp. and Starbucks Corp. won’t be part of the party. The regulations don’t permit marijuana to be sold in stores that sell things other than pot edibles, liquids and paraphernalia.

 

Jamen Shively, a former Microsoft manager who made a splash announcing a plan for a national brand of marijuana, won’t get far here. For one thing, the rules limit the number of licenses investors can acquire.

 

The state of Washington won’t set prices for marijuana, with its many mellifluous and colorful strains. The legalization initiative didn’t provide for that.

 

The market will set the price. Marijuana that costs, say, id=”mce_marker”0 to id=”mce_marker”2 a gram on the street today could cost id=”mce_marker”4 to id=”mce_marker”8 in a pot store, counting taxes, security and other costs. Or prices could be about the same. It depends on whom you talk to. Over time, legal pot should become cheaper and more desirable.

 

“There is enormous value in being able to walk safely into a store and know you are purchasing a high-quality, safe product that previously carried big risk,” Carlyle said.

 

Moving people from the illicit marketplace to the legal one is a challenge. Safety is a selling point: State-approved products will be screened for pesticides, mold and bugs. (That black-market stuff has spider mites and chemicals you might not want to know the names of.)

 

Perhaps the most acrobatic balancing act is between taxation and price. Tax legal marijuana too much, and fewer people will buy it. Tax it too little and public support could wane if minors get a hold of it or if it slips across state lines.

 

The Department of Justice announced late last summer that it wouldn’t interfere with legalized recreational marijuana in Washington and Colorado with several big ifs — if it stays out of the hands of minors, if it doesn’t migrate across state borders, and if the states manage drugged driving.

 

Some experts say law enforcement should ramp up and push illegal purveyors out of the market more rapidly. Local communities might not be able to afford to redirect law-enforcement resources in this way.

 

“This is the birth of a new industry,” Simmons said. “People want this thing to be born as a fully grown adult. But it’s still a baby, and we have to nurture it and protect it and help it grow.”

 

Washington and Colorado are the pioneers, adventuring, or lurching, forward; others will follow. Social attitudes toward legal marijuana for adults are changing quickly.

 

The rollout of recreational pot will hit many bumps along the way. Yet if these states and the new entrepreneurs manage the controlled experiment competently, they will become the model for the rest of the U.S. and for other countries — which are already calling for advice.

 

NY governor authorizes medical marijuana

New York (AFP) – New York Governor Andrew Cuomo announced Wednesday he will authorize the medical use of marijuana, making his the 21st US state to do so and one of the biggest.

Cuomo, a Democrat who has in the past opposed such a measure, announced a limited pilot program to serve the state of 19.5 million people.

“We will establish a program allowing up to 20 hospitals to prescribe medical marijuana,” he said during his annual state of the state speech in Albany.

Cuomo argued that research has suggested marijuana, which is widely but illegally used for recreational purposes, can help patients “manage the pain and treatment of cancer and other serious illnesses.”

“We will monitor the program to evaluate effectiveness in the feasibility of (a) medical marijuana system,” he added.

Cuomo, 56, who last year described his support for decriminalizing the possession of up to 15 grams of the drug, is likely to proceed by decree, after four previous attempts to legalize medical marijuana failed to get traction among the state’s lawmakers.

The announcement comes as part of a growing movement to relax US laws on marijuana.

According to an October 2013 Gallup poll, 58 percent of Americans favor legalizing marijuana.

Including New York, the drug will soon be allowed for medical reasons to various degrees in 21 of 50 states and in the capital Washington.

The first state to legalize medical marijuana was California, in 1996. A prescription can be obtained there for conditions as minor as a bad back.

In Massachusetts, where the drug was legalized by referendum in November 2013, patients can possess “no more marijuana than is necessary for the patient’s personal, medical use” for up to a 60-day supply, to ease suffering from cancer, glaucoma, HIV or AIDS, Hepatitis C, Parkinson’s disease and other serious conditions.

Vermont authorizes registered patients to possess “no more than two mature marijuana plants, seven immature plants and two ounces of usable marijuana.”

Oregon authorizes 680 grams, including for people who suffer from post-traumatic stress disorder.

Colorado has gone even further. Since January 1, recreational users older than 21 can legally buy up to 28 grams of cannabis for their own enjoyment regardless of their medical status.

The state of Washington took a similar measure, set to take effect in the coming months.

Authorities in both states oversee the production, distribution and marketing of cannabis there.

At the federal level, the sale and possession of marijuana remains illegal. But in October 2009, the White House sent a memo urging federal prosecutors not to pursue cases against people distributing the drug for therapeutic purposes.

Cuomo’s announcement comes just days after Bill de Blasio — further to the left than the governor — became New York City mayor.

Cuomo, who’s up for re-election at the end of the year, highlighted the economic success of his state, the necessity to lower business taxes there and to modernize the school system.

He has been tapped as a possible presidential candidate in 2016, along with his moderate Republican counterpart in neighboring New Jersey, Chris Christie.

New Jersey already authorizes marijuana for medical use within a strict framework. That state’s law has recently been expanded to include certain childhood maladies.