MMJ Delivery Service Companies Face New Tax Issues in California

ACH Marijuana Check ProcessingA new issue has recently come up for the California medical marijuana industry concerning delivery services. The dispensaries that use delivery services to transport cannabis to patients may face a new challenge on the tax front if they fail to use caution.

According to Jerome E. Horton, chairman of the state’s Board of Equalization, MMJ delivery fees are taxable in some cases. On the other hand, businesses could pay more in taxes than they owe if they do not realize that those particular delivery fees are not taxable. While the sales of cannabis are generally taxable under California law, delivery fees are not as long as certain conditions have been met.

For example, a dispensary must list the delivery fee separately on their invoice; this ensures that it can be independently verified. In addition, a third-party must be responsible for handling the delivery. The charge incurred cannot be more than what the dispensary actually paid the delivery service for the handling of that transaction.

If this is not documented and these conditions are not met, tax will apply to the seller’s entire delivery charge if it is made in connection with a taxable sale of cannabis products. In the event that this does occur – the fee exceeds the cost of the service to the dispensary – the difference between the price charged and the expense will be taxable.

Board of Equalization (BOE) Chairman Jerome E. Horton reveals that “As a seller of cannabis products, you must report your total sales on your sales and use tax return. If your total sales include nontaxable delivery charges, you should take a deduction for those amounts on the line for ‘Other’ deductions. If you don’t take the deduction, you’ll pay more tax than you owe”.

With investors warming to cannabis, many entrepreneurs are seeing dollar signs, and not just in the sale of cannabis itself. Eaze, a technology company that helps facilitate medical marijuana deliveries to patients, has raised $10 million in venture capital funding. This funding will allow the company to expand geographically while also improving its customer service.

Patients simply use their medical marijuana cards on the company’s websites, enter the strain, and the amount they wish to purchase. Eaze then contacts a dispensary, an independent driver is dispatched to deliver the marijuana and the delivery is made in 15 minutes or less. All of this occurs without Eaze ever physically coming into contact with the marijuana.

The creators of Eaze are not the only ones who have seen the possibilities in these types of services. Many entrepreneurs and investors are seeing the possibilities, but run into problems when trying to secure payment processing. Traditional banks are turning the medical cannabis industry away. And it goes without saying that cash is not a safe option.

Medical marijuana payment processing allows both retail and delivery dispensaries payment processing solutions. Patients will be able to pay with their credit card, debit card or savings account. With questions over regulations and taxes still popping up, medical marijuana payment processing offers a safe option for processing needs.

Contact us for ACH Check Processing solutions for your MMJ business.


Lessons from the Business Executive – Marijuana Business Funding

MarijuanaThere’s a reason why people like to say “been there, done that”. Someone who has learned how to handle a situation, or a business, has done so with a lot of trial and error. Yes, some things were figured out easily. But a lot of things in life, and in business, are learned the hard way. For those who have experienced success in the marijuana industry, there is no exception.

Thoroughly understand the concept of margins and gross margins

If you sell $100,000 worth of products and your cost for those products is $65,000, your gross profit is $35,000. Your gross profit margin is 35 percent. Thus, to find your gross profit, you subtract inventory costs from sales.

When making purchases for your store, you need to consider the cost of those products along with gross margins. In order to make wise purchases, you must consider approximately what margins you need to make based on your sales and expenses. In balancing your inventory with a combination of higher and lower margin products, you can achieve some flexibility.

Keep in mind that lower margin products can sometimes bring prestige to your store. Highly valued and sought after strains of cannabis also means that growers will charge more for pounds. In order to offset these lower margin products, a business can buy some less expensive, higher margin product.

Obtain and Maintain the Right Inventory

One of the most important aspects of successfully running a marijuana dispensary is having the right inventory; this also involves choosing the right inventory manager. They must be a real weed “geek” in that they can recognize strains and subpar trim jobs. Years of experience and a passion for the job are involved in acquiring such a skill set.

A good inventory manager must also know the market. What strains are currently the most sought-after? What new products are up and coming?

The optimal inventory will change from state to state, area to area, and shop to shop. Whether the inventory is recreational or medical based will matter as well. One fact is true across the board – the right mix of flower, concentrates and edibles is essential.

Overcome the banking challenges of the industry

Banking has and continues to be one of the biggest challenges for the marijuana industry. Although the acceptance of cannabis has come a long way, it is still illegal on the federal level. As a result, banks tend to turn and run the other way.

If you find a bank in your state willing to work with you, jump on the opportunity. For the majority of businesses however, this is not the case. It goes without saying that operating in cash is simply inconvenient and incredibly unsafe.

To find solutions tailored to the industry and to avoid operating in cash only, businesses are turning to high risk providers for their marijuana business funding needs. High risk processors specialize in working with industries considered high risk. Their application processes are also simple, fast and hassle-free. Basic documentation is required, unlike the endless red tape you will likely experience with traditional institutions.

Take advantage of the information from those who have “been there, done that”. Maintaining the right inventory, watching your margins and securing business funding will strengthen your business. Don’t let mediocre inventory and banking challenges hold you back.

Contact us for Marijuana Business Funding Today!