Ideas & Insights

Banking Access Strategies for Cannabis-Related Businesses

Banking Access Strategies for Cannabis-Related Businesses

A ROADMAP FOR GOVERNMENT AGENCIES

On November 7th, California State Treasurer’s Cannabis Banking Working Group issued a report outlining strategies for government agencies to address banking issues related to the sale of recreational cannabis. Find out how MGO can help your government agency execute these strategies today.

On January 1st, recreational cannabis sales become legal in California. That means an estimated $7 billion in annual sales – which should result in a windfall of tax revenues for state and local government agencies. For municipal government executives, that’s where things start to get complicated.

Because of the clash between state and federal law when it comes to cannabis, banks are unable to work with cannabis businesses. This forces business operators in the industry to deal mostly in cash, which creates a whole slew of problems. The most important being how to guarantee the safety of those who have to deal with large amounts of cash, including people in the cannabis business, any financial institution involved, and governmental agencies collecting taxes. California has spent the last year working on a solution to that problem and a host of other issues surrounding cash and cannabis.

To tackle the cannabis banking challenge, California State Treasurer John Chiang created the Cannabis Banking Working Group. The group spent the last several months researching the problem, talking to cannabis entrepreneurs, government leaders and industry experts. We’re pleased to say MGO was among those asked to share insights. During interviews with the Cannabis Working Group, MGO was able to share many ideas already in development at the firm, specifically MGO’s California Cannabis Tax Collection Solution. MGO’s solution is featured prominently in the Cannabis Banking Working Group report.

MGO’s Cannabis Tax Collection Solution starts with a cloud-enabled Smart Safe that can be installed at the cannabis operators’ location to collect tax and fee payments. The business makes deposits into the safe, which are electronically transmitted and summarized by a Third Party Administrator. The physical cash is routinely transferred from the Smart Safes by armored car. The Third Party Administrator makes sure all the taxes and fees are properly reported, coordinates with the cannabis business, and facilitates the armored courier.

This eliminates the need to directly handle large sums of cash for anyone not already equipped to do so safely while also easing the federal know-your-customer requirement banks face because the municipality is the customer. While this clearly solves a list of issues for the municipality, it also helps the cannabis business become Tax Compliant, something MGO strongly believes is necessary for any successful business, regardless of industry. See pages 12 – 15 in the Cannabis Working Group’s Report, download here >>>

For the complete MGO California Cannabis Tax Collection Solution,
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