Why is IRS auditing?
Lately the IRS has inspected large amounts of cash transactions of some cannabis companies in Colorado.The cannabis companies are very worried because of the latest investigations but the IRS seems to have their reasons since the audits are based on Form 8300. This form includes reporting cash payments over $ 10,000, so the IRS has been thinking on many potential money laundering cases.
The Colorado attorneys are telling companies that they shouldn’t freak out because it’s normal and that “every cash-intensive industries are subject to Form 8300 filing requirements” and that they still should have a tax attorney by their side.
If you fail to file a Form 8300 you can risk jail time and financial penalties.
How many dispensaries are there?
Opening a dispensary seems a good way to make money and Colorado made is very easy for almost anyone to do it. If you are above 21 and never been a felon you can easily became a cannabis business owner simply because there is a huge demand for the product.
By 2014 Colorado has released more than 2,500 marijuana business licenses and more than 900 of them are dispensaries. The numbers keep growing, while the growers and producers are making more and more money. With these big demands some are worried that the producers aren’t giving out their best quality or the products are contaminated. In this case the dispensaries could not sell the product because of the strict rules, but for the grower remains an option to make some money, a option such as the black market.
How profitable can a dispensary be?
The cannabis business can be tricky, the owners have to stock their dispensaries very well with various kinds of cannabis but the main problem is finding a way to store and manage their money since most of the banks don’t like to have knots with such businesses.
Colorado has talked about their first year of legal weed, that began in 2014, everything changed, the crime rates went down, the tax revenues went up, everything seemed to be fine except for the fact that some people do not agree with the “drug”.
About the profits, some are saying that the money, as soon as it comes it goes for expenses. One of the owners of a Colorado dispensary said that he has 50 customers/day from its stable of 300 regular medical patients, growing up to about 80 sales per day on Fridays and Saturdays. Each of his customers are spending about $65 per visit that means he’s been bringing in about $100.000/month. In 2013 he said he brought in $ 1 million for the first time and he said he could gain significantly more from recreational pot sales. But the costs are high too, the owner is saying that he had to destroy an entire crop because it was highly affected by mold and pests, but the highest cost began when he started applying for recreational marijuana sales license, he estimates he’s been spending out $15,000 to $20,000 over each of the past four months on city and state applications, licensing, inspection, and permit fees. Never minding the IRS will always be watching.
I would think twice before opening a dispensary, what would you do?