As part of a meticulous regulatory framework overseeing the medical marijuana industry in Colorado, radio frequency tags are attached to each plant, product and item in local facilities, allowing enforcement officers to track them as they make their way from sprout to store shelf./Photo by Jennaye Derge

Ground support

Local dispensaries to ask city leaders for help with bank backing

by Tracy Chamberlin

No credit cards. No checks. No automatic withdrawals or monthly statements. Not even a deposit slip.

In a digital world where most money flows in ones and zeroes, medical and retail marijuana businesses cannot simply open accounts at the local bank and are instead left dealing in paper greenbacks.

The underlying fact is, marijuana is still considered illegal under the federal Controlled Substances Act. Although 23 states have legalized medical marijuana and two have legalized pot for recreational purposes, banks that are FDIC-insured are at risk under federal law.

JusttheFacts What: City Council meeting When: Tues., Aug. 19, at 6:30 p.m. Where: City Council Chambers, 949 E. 2nd Ave. For info.: 375-4850 or www.durangogov.org

For many in the marijuana industry, though, it’s not just inconvenient having to pay bills with a money order, it’s a serious safety issue.

Joelle Riddle, manager of Medical Horticultural Services in Durango and a former La Plata County commissioner, said she carries a Taser with her when paying bills. Regardless of whether she’s carrying one penny, $1 or $1,000, it’s a clear public safety concern having to run a cash-only business.

Riddle, along with other members of the industry, patients and supporters, plans to attend the City Council meeting at 6:30 p.m. Tues., Aug. 19, and spend five minutes during the public comment period explaining their situation to the other citizens and the City Council.

“I’m really hoping that the councilors, as well as anyone listening, will advocate for community safety and equity in business,” Riddle said, “... and, we get a bank.”

The rumor mill swirls with talk of ways to deal with the situation and several sources have said they know there are banks opening accounts; however, everyone involved is at risk.

Whether it means frequent trips to buy money orders or investing in a Taser that could take down a 300-pound man, local medical marijuana businesses are finding ways to live without banks. “It’s unnecessary pressure on a business,” Riddle explained.

She said she doesn’t think La Plata County residents, who approved Amendment 64 during the 2012 elections by a 62 percent majority, are aware of the problem.

One thing that most marijuana businesses have in common is the desire to be treated like any other local business. No different than a convenience, liquor or grocery store. Or even a bank.

Beth Drum, senior vice president of Alpine Bank in Durango, said she understands the frustration and it was eye-opening to meet with a local, medical marijuana business looking to open an account. “We can’t treat them like any other business in town.”

Drum said although the medical marijuana businesses in Durango are legitimate, Alpine can’t treat them just like any other business in town. That’s something that will take an act of Congress.

“That’s our bottom line,” Drum explained. “We are still federally regulated.”

U.S. Attorney General Eric Holder speaking at an 4 event in January, said cash-only businesses like those in the medical or retail marijuana industries, were a public safety concern. Just a few weeks later, two memos floated down the federal stream from Washington offering guidance on the issue.

They laid out how banks could work with medical and retail marijuana businesses and what reports to file and forms to fill out. What they did not offer is actual protection.

“I really hope in the next year or two that we see some regulation and some better guidance for banks,” Drum said.

Marisa Williams, an employee of MHS, holds up a shirt that has been created to help campaign for legal bank accounts for dispensaries./Photo by Jennaye Derge

Riddle called it a national crisis and a gaping hole in an otherwise meticulous regulatory framework overseeing the industry.

Radio frequency tags attached to each plant, product and item in the store allow enforcement officers to track each piece as it makes its way from sprout to store shelf. Employee fingerprint identification is required to make even a simple transaction. Yet not one of these sales involves a bank deposit or monthly statement.

In one instance, Riddle said she had to buy a $15 money order to track another money order that had not yet reached its destination via the mail.

Recently, Riddle said MHS earned thousands of dollars under an La Plata Electric Association rebate program for installing LED lights. Without a business bank account, the co-op could not simply mail the local company a check for its efforts.

Eventually, they were able to work out a way to credit the business but, according to Riddle, it took time to figure out how to work around the issue of not having access to a bank account.

And, it isn’t not just an issue of inconvenience or even safety. Riddle said the business is no longer able to offer employees health coverage. Their insurer stopped accepting money orders as a form of payment. So, without a bank account to pay bills online or send in a check, they were forced to cancel that benefit.

Then there are the tax deductions available to most businesses. Riddle said a cash-only business is not afforded those allowances. In fact, a cash-only business can be penalized when it comes to tax payments.

This summer Allgreens LLC filed a lawsuit against the Internal Revenue Service for imposing penalties against the Denver-based medical marijuana dispensary for making payroll tax payments in cash, instead of using the Electronic Federal Tax Payment System, or EFTPS.

The IRS levies a 10 percent penalty for making those quarterly payments in cash, which for Allgreens amounts to $20,000 a year. Although the suit hasn’t made its way to the courtroom, the issue is truly a federal case.

Since the retail marijuana industry hit the ground running in January, and more shops are set to open in the future, the banking dilemma is not likely to disappear.

In Gov. John Hickenlooper’s first budget proposal, released in February, he expected more than $950 million in medical and recreational marijuana sales and $134 million from tax revenues. Those are only projections, though.

No matter what numbers turn out to be the official tallies or how those monies are eventually spent, state leaders surely anticipate millions in tax revenues from the marijuana industry and hundreds of millions in medical and retail sales.

And all of those transactions, including the ancillary businesses, are expected to be done in cash. The only question left is where to deposit all those greenbacks.