Dear Pot Lawyer,
How can I break into the recreational cannabis business?
Becoming a success in the Oregon cannabis industry isn’t out of your reach. Like any business, it will take perseverance, courage, and commitment. However, you will also need to be willing to deal with continually changing regulations, unfair taxation, banking issues, and the ever-present threat, however small, of federal intervention. Here is a brief starter on what you need to keep in mind.
LICENSING—The Oregon Liquor Control Commission administers Oregon’s recreational cannabis program. All licensees must go through an extensive application process and renew their licenses yearly. The law changes quickly, so you will need someone on your side to keep you compliant with the evolving regulatory landscape.
LOCATION—Your state license must be tied to real property. Don’t sign the dotted line until you are certain that your property is suitable for your cannabis operation. This includes ensuring that the property is in a cannabis-friendly city or county, complies with local zoning and land use codes, and has adequate power and water for your needs. Every city and county is different, so part of your location search should include analyzing any local licensing requirements.
BANKING—In 2014, the feds finally issued guidelines that allow banks to provide services to cannabis businesses. In short, banks need to make sure that they know everything about your business and report any suspicious activity to the feds. If you want to do business with one of the few Oregon institutions that even allow cannabis accounts, expect it to be expensive and one of the most invasive experiences of your life.
TAXATION—Although the feds view your company as illegal, you will still be expected to report your income to the IRS. Unfortunately, a tax provision called 280e will prevent you from deducting business expenses. This will artificially inflate your taxable income and effective tax rate.
TRACKING—Whether you’re a cannabis producer, processor, wholesaler, or retailer (or some combination), your product must be tracked from seed to sale. Oregon uses an online program called METRC to track all legal cannabis in the state. You will need to become proficient in the use of these online tools.
SECURITY—One of your biggest up-front expenses will be installing physical and electronic security measures that will satisfy the OLCC that your product will not end up in the hands of minors or the black market. This will include safe rooms, cameras, employee training and supervision, and regular inspections.
TESTING—Oregon is rightfully focused on consumer safety, so cannabis products undergo rigorous testing for THC/CBD concentration, biological contaminants, pesticides, and the like, all at significant expense for your business.
Your business plan must account for each of these issues (and many more), but you can do this. Good luck!
Got a question? Email us at potlawyer@portlandmercury.com. And remember that if you have a legal problem, contact a lawyer! Our educational musings cannot be relied upon as specific legal advice.
