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Education

Fee-free payment An enormous tax burden

Businesses legally selling marijuana and other cannabis
processing: a must products generate significant tax revenues for state and
local governments. In Washington state, taxes collected on
for pot shops retail cannabis sales last year outpaced taxes collected on
alcohol sales, according to an analysis by the Marijuana
Policy Project. Since 2014, when the first two states
By Max Miller (Colorado and Washington) legalized adult recreational
sales of marijuana, states have collected nearly $8 billion
Paybotic in taxes on these sales, the MPP reported.

t's hard to dispute the benefits of fee-free payment Legal cannabis businesses also find themselves in the
processing. That's why so many ISOs and merchant unenviable position of having to pay more in federal
level salespeople (MLSs) now offer businesses cash income taxes than other legal businesses. That's because
I discounting and surcharging options, and are earn- Section 280-E of the Internal Revenue Code prohibits these
ing great residuals in the process. businesses from claiming traditional business expenses—
cost of security, marketing, rent and utilities, payment
For marijuana dispensaries and other businesses selling processing fees—because cannabis remains illegal under
cannabis products, point-of-banking systems, also known federal drug laws.
as cashless ATMs, present a similar benefit scenario for
PIN-authorized credit and debit card acceptance. Cannabis shops can only deduct the wholesale prices
The deck is stacked against legal pot shops they pay for cannabis products. This applies to all state-
sanctioned cannabis businesses, whether they cater to
It's a well-known fact that marijuana businesses operate medicinal or adult recreational customers.
at a disadvantage to other businesses, like restaurants and Point of banking: a win-win
auto repair shops. This places even more importance on
the ability to offer money-saving services to this largely With the income tax deck stacked against them and most
unbanked vertical. traditional sources of business finance closed off, cannabis
businesses must find other ways to reduce overhead.
It's a well-documented fact that most banks and credit Fee-free payment processing saves them money on card
Not All Portfolio Buyers unions have shut their doors to cannabis businesses, as processing and reduces the cost of handling and securing
have the domestic arms of the major credit card brands. the mountains of cash they collect on daily.
Are Created Equal. That means traditional card acceptance is off limits. So
are bank loans and government assistance. In fact, despite Card payments initiated through point-of-banking
being classified as "essential" businesses in most states terminals process through regional ATM networks,
during the COVID-19 pandemic, marijuana businesses which unlike the credit card networks, don't prohibit
The in dustry's trusted portfolio
were locked out of the financial assistance available to
purchaser sin ce 2006 transactions tied to legal marijuana sales. The payments
other small and midsize businesses under the CARES Act are PIN authorized, and post as debits to customer
and subsequent relief programs.
No new accounts requir ed – no checking accounts (in the case of debit cards) or as credit
card cash advances.
Legal sales of cannabis across the United States are soaring,
min im ums – no penaltie s
exceeding $17.5 billion in 2020, according to cannabis Consumers are accustomed to paying convenience fees
research firm BDSA. And because of the reluctance of when accessing cash from ATMs. Many pay convenience
Keep your merchants wit h your
financial institutions and the credit card networks to open
ISO – no convertin g - no movin g fees to withdraw cash from ATMs located at or near
up to cannabis businesses, a big chunk of that total was dispensaries when the only in-store payment option is
transacted in cash. cash. Convenience fees are a time- and money-saving
- no sellin g your merchants
proposition for dispensaries and their customers/patients.
All that cash flowing into dispensaries and other cannabis Plus, it makes the dispensary POS experience more like
Our skil led support team can take
businesses is a recipe for disaster. In the Portland, Ore.,
over servic in g your merchants that of every other business.
metropolitan area, for example, cannabis dispensaries
were robbed, burglarized or looted more than 100 times
Full or Partia l Buyouts In time the laws and regulations that prevent cannabis
between March 2020 and March 2021. As more states shops from using the credit card networks will change.
Quic k Closures - Flexi le Deals - legalize marijuana for medicinal and adult recreational But why wait? ISOs and MLSs can sell these businesses a
uses—37, plus the District of Columbia and several fee-free way to accept card payments today, with point-of-
territories have done so to date—the costs and risks banking solutions.
Honest Valuatio ns
associated with handling massive amounts of cash will
surely mount. Max Miller is founder and CEO of Paybotic, a payment processing
company specializing in high-risk businesses, including cannabis busi-
nesses. Contact him at max@paybotic.com.
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