GRAND RAPIDS, Mich. (WOOD) — As the buzz of legalized marijuana begins to wear off in Michigan, industry professionals are bringing attention to the many costs and challenges facing pot shop owners.
“The headlines in the news are the revenue numbers, but what’s missed is the cost of generating those dollars,” Erik Schumacher said.
As the head of the cannabis group for Rehmann, an accounting and consulting firm in Grand Rapids, Schumacher helps clients navigate the complexities of the cannabis industry.
“I don’t think people are fully aware of all the obstacles that these entrepreneurs have to jump through or have to deal with in running their business,” Schumacher said.
The obstacles primarily stem from the discrepancy in state and federal law. Because while the use of medical and recreational marijuana is legal in the state of Michigan, it’s still in violation of federal law.
“As a result, there’s a lot of nuances and a lot of limitations to access of services and access to the same type of things that any other business that operates in the United States would be able to be afforded,” Schumacher said.
Finding a bank to do business with is one of the biggest challenges as banks are subject to federal law in which marijuana remains a Schedule I controlled substance —the same as meth or heroin.
According to Robert Hendricks, an attorney with Warner Norcross + Judd LLP who specializes in marijuana business law, federal law says it’s against law to use a bank for marijuana purposes, even if the business is in compliance with state law.
“Federal law trumps state law,” Hendricks said.
However, a few select banks are beginning to dabble in the marijuana industry.
Hendricks said these banks tend to be small financial institutions chartered by the state, instead of big banks that would be more likely to get prosecuted by the feds.
“The smaller banks say, well, what are the chances that the federal government is going to take an interest in me? So, I’m going to go ahead and provide services to them because it’s very unlikely,” Hendricks said. “It’s not that the federal government couldn’t but that the federal government likely won’t.”
With limited banking options, some businesses run a cash-only operation, often leaving the business owners or associates no choice but to carry around brief cases full of cash just to pay their taxes.
“What other industry puts their owners at such risk where they have to handle that amount of cash or travel the roads or pay somebody to take that risk for them?,” Schumacher said. “It’s the only industry I’m aware of.”
Schumacher said slowly but surely, these challenges have started to fade, but with limited options, the cost of doing business hasn’t.
“I think there are solutions for almost anything. It’s just your options and the cost of those solutions are limited,” he said.