by Aaron Smith, NCIA Co-founder and Executive Director
When a handful of top cannabis business leaders came together to form a national industry association in 2010, the world was a different place. Medical cannabis providers were routinely raided by federal law enforcement, the media often characterized cannabis businesses as illegitimate, and there was little political will in Congress to take on the marijuana issue whatsoever. Some of my colleagues in the reform movement even expressed skepticism over whether it was entirely a good idea to bring the industry together as a vocal stakeholder in the fight to change outdated marijuana laws.
Aaron Smith at NCIA’s 1st Annual Cannabis Business Summit, June 2014
As we come close to concluding our 5th year of operation, I’m incredibly proud of what our members have made possible. Cannabis businesses are now largely taken seriously by the mainstream media, a majority of voters, and we are experiencing greater momentum in Congress than ever before.
Too much has happened over the last half-decade to list it all but here are just a few key developments:
Four states and the District of Columbia have legalized adult cannabis use and robust industries have already taken root in Colorado and Washington,
Protections for medical marijuana businesses have been included in the federal government’s annual budget,
Presidential candidates are taking our industry seriously and at least one held a fundraiser with the industry during NCIA’s national Cannabis Business Summit, and
This progress didn’t happen by coincidence. The cannabis industry is finally being taken seriously because our members have come together to assert their collective economic and political strength just as every other business sector does.
The coordinated political and communications strategy executed by NCIA has changed the narrative around marijuana. The debate is now more about how legal cannabis sales will be regulated than about whether people should be put in jail for its use. We have also reframed the conversation so that responsible cannabis businesses and the economic and social benefits they offer communities are at the forefront.
2016 is going to be an even bigger year for the industry and as we look back at our accomplishments, we also must acknowledge there is so much more work that needs to be done before our industry is treated fairly under federal law.
In celebration of NCIA’s 5th Anniversary, we are challenging each of our nearly 1,000 members to contribute at least $500 in our annual fund drive so that we can start next year off as strong as possible.
As a token of my gratitude, all members who contribute to this cause will be acknowledged at our 5th Anniversary Banquet in Las Vegas on November 11. All contributors will also be entered into a drawing to win an iPad Air 2, which will be selected at the Anniversary Banquet.
Please consider investing in the future of the industry by giving a $500 gift to NCIA* today. All proceeds will support our direct advocacy and lobbying efforts on behalf of the cannabis industry.
*This link to will take you to our new donation website, hosted by MemberClicks.
Guest Post: Favorable IRS Ruling – State Excise Tax May Escape 280E Treatment
by Luigi Zamarra, CPA
On July 31, 2015, the IRS released ILM 201531016, concluding that the old Washington State cannabis excise tax may be properly treated as a reduction of gross revenues received. This is a very favorable ruling for our industry as it means that this tax can escape the harsh non-deductibility treatment of IRC Section 280E.
Although this ruling is applicable directly only to old Washington law, it may have far-reaching consequences for cannabis businesses operating in other jurisdictions that also impose special taxes on cannabis business activities.
As originally enacted, the Washington excise tax is imposed upon all sales of cannabis, at either the producer level, the processor level, or the retail level. As written, the tax is imposed upon each sale. (This law has now been amended so that the tax is imposed only at the retail level.)
The IRS has concluded that businesses may treat this tax as a reduction of Gross Revenues. This treatment is similar to “Returns & Allowances” in that it is a “Revenue Contra Account.” As such, it is not an expense, either above-the-line (Cost of Goods Sold) or below-the-line. Since it may be treated as a reduction of Gross Revenues rather than as an expense, it should escape treatment as non-deductible under IRC Section 280E.
Colorado also imposes a variety of special taxes upon cannabis sales. In California, local cities and counties impose special taxes on cannabis sales too. Although it is not yet clear, it seems there may be opportunities for businesses in these jurisdictions to take advantage of this ruling. This would involve these businesses changing their accounting treatment for these taxes: away from an expense or Cost of Goods Sold treatment and toward a Revenue Contra Account treatment.
Businesses are advised to consult with their CPA for a more in-depth analysis of the application of this ruling to their particular situation.
Luigi Zamarra, CPA
Luigi Zamarra, CPA, has been a member of NCIA since 2013. Luigi CPA is an accounting firm located in Oakland, CA, that helps all types of businesses and individuals with tax planning, tax compliance, and tax dispute services. Luigi specializes in the medical marijuana industry. He helps these businesses comply with IRC Section 280E so as to balance tax cost against audit examination risk.
*Disclaimer: NCIA does not provide legal or financial services or advice. Any views or opinions presented in this guest blog post are solely those of the author and do not necessarily represent those of the organization. You must not rely on the legal information on our website as an alternative to legal or financial advice from your lawyer or other professional services provider.
VIDEO: What do members have to say about NCIA?
NCIA co-founder Aaron Smith invites you to hear from a few of our members about why NCIA’s work is important to their businesses. Watch testimonials provided by Khadijah Adams of Marijuana Investments & Private Retreats, AC Braddock of Eden Labs, Ralph Morgan of O.penVAPE, and Tae Darnell of SURNA.
We appreciate the nearly 1,000 members that make up our network of responsible cannabis businesses.
Cannabis sits on display in SPARC, a boutique cannabis shop in San Francisco, CA.
Across all industry verticals, customers are seeking more authentic and personal transactions. Company leaders are being forced to choose between scale and service, and the consumer market is starting to view this dichotomy as “good and evil.” There is a better way… and the cannabis industry must define it!
Most people understand the cannabis industry is positioned at one of the most integral crossroads in business history. Unlike any previous industry, the cannabis “vertical” was already a well-established culture, having existed for thousands of years in various forms. Cannabis as food, medicine, enlightenment, and recreation were cornerstones in social contexts across the world. As a regulated industry has emerged and grown, a battlefield is taking shape, and it is my belief that the victor in this confrontation will set the tone for the entire business environment – not just cannabis – for the next century. The first waves of the clash have washed over Colorado and Washington, but it is early yet and no edge has been gained on either side. Will the influence of the culture developed over millennia be strong enough to defeat the dogmas and principles developed in big business over the past couple of centuries? Will selfish pillaging be the business modality of the future?
It is arguable that momentum is generally on the side of the culture. This can be seen in the bestseller list when both Ask and David and Goliath were in the top three of the list at the same time. The proliferation of farm-to-table eateries across America is also indicative, and finally, even Chiquita Bananas has entered the market of ‘authentic personality’ by attaching the real life stories of their farmers in other countries to their individual banana stickers. Many big industry players across the globe are realizing consumers want more than a transaction when they make purchases. Clearly, the expansive cannabis culture can’t be pigeonholed, but if we take a few core elements, we can define that zeitgeist as close, personal interactions, conscientious consumption (think wise use of resources) and unique experiences designed for purposeful feeling.
If momentum is on our side, why is a war going to be fought? Dollars. Billions of dollars are up for grabs; all kinds will show up, and those for the old regime will fight to defend their fortunes, their power, and their belief structure. Ruthless capitalism has been successful in the past, congregating vast resources into small fractional groups in every major industry on earth.
With past success comes future repetition,
and that is where the nascent cannabis economy has an enormous responsibility.
It is our collective duty to ensure this industry is built correctly from the ground up. Having a smattering of B-Corps speckled about the vertical is not acceptable. Showcasing a signature brand doing things correctly is more indicative of our failure than it is our success. This is the opportunity to merge culture and business, to define not only how this industry will operate and cater, but deliver a blueprint for industries not yet imagined.
It is our challenge to redefine boutique and small,
where they are not describing size and scale,
but rather perspective and action.
It is our opportunity to redefine scale, not as consumption of resources, but by the growth and breadth of a culture. We can build a model where operating boutique can not only provide opportunity for vast financial wealth, but can also be a better, easier means of doing so. We must demonstrate that this model is so much more successful, even in traditional business terms, that future industries no longer see the old system as a viable option. Thousands of years of human culture has passed us this torch, and people centuries ahead count on us.
We must perform.
Travis Howard, General Manager & Founder at Shift Cannabis Co.
Travis Howard is General Manager and Co-Founder of Shift Cannabis Co., a boutique consulting firm focusing on boutique cannabis cultivation and retailing. Shift Cannabis Co. has been a member of NCIA since April 2014. Travis splits his time between corporate management practices and the legal areas of dynamic entrepreneurial industries. He holds a Juris Doctorate from the University of Colorado School of Law and a Bachelor of Science in Business Administration from Colorado State University.
His cannabis industry experience started in 2009 with KindReviews.com and progressed with owning and operating a Boulder dispensary and multiple cultivation centers. He has been consulting to the national industry since 2010, having lectured in multiple states for CannaBusiness Media and the National Cannabis Industry Association. He is currently mentoring the first class of students at Canopy Boulder and thoroughly enjoys sharing his experiences in cannabis.
While he enjoys the cannabis industry, Mr. Howard has a broad business background encompassing specialties in computer information systems, project operations control, and public speaking platforms. In addition, Mr. Howard’s diverse portfolio of professional experiences includes System Administrator roles, Office Director positions, CEO titles, and Board of Directors membership.
Guest Post: Regulating Marijuana – What Direction for FDA?
The Food and Drug Administration (FDA) has learned the hard way, over decades, that there is a moving ‘thin blue line’ for it to take legal action. On one side, the last thing FDA wants is to see thousands of seriously ill people demonstrating at the gates, as happened during the AIDS crisis when FDA stood between horrendously ill and dying patients and potentially life-saving drugs. FDA has become a much more savvy political organization since then and knows that any action it takes is always subject to second guessing by the courts, by Congress, and by political pundits on all sides. On the other side, FDA must act when there is clear evidence of people being harmed by products that fall within its jurisdiction.
There is no question that marijuana, whether in smokable, edible, or any other form, creates drug-like effects in people and animals. This medical fact is acknowledged by everyone and everyone admits that FDA could have jurisdiction to act, if it chooses to act. So why hasn’t FDA acted, and can we read the tea-leaves to foresee when it will act, and how it will act?
The key issue for FDA is always safety to people and especially ‘at risk’ patients such as children, people who might mistakenly take cannabis, or people who are medically compromised. Since no one can smoke cannabis by mistake, and FDA physicians can assure themselves that smoking cannabis has remarkably few toxicity issues, the only remaining safety concern is ingestion. Since it is possible to keep ingesting cannabis-containing food materials until a person reaches levels of medical concern, the question moves to: let’s take a look at the data.
Steve Goldner, Regulatory Affairs Associates
While there may be some overdosed patients who have not been reported into the hospital reporting networks, we do have a couple of years with consumers and consumables in Colorado and Washington State. While there have been some reports of regrettable overdoses that created harm, in general, epidemiologists are surprised by the remarkable absence of medical problems. Frankly, we were expecting significant reports of mortality and morbidity, and the reports are nowhere near the level of concern that FDA sees in field reports when action is necessary to save lives. Certainly there have been isolated problems, but far less than were expected and the trend seems to be towards better labeling, better quality control, and better information at point-of-sale.
So if past action was not necessary by FDA, and current action doesn’t appear necessary, what about future action? Does it look like the marijuana movement is working towards higher standards, more scientific analysis, and greater transparency with medical and scientific collaboration? Or is this movement trying to hide problems and deny that critical self-examination issues need to be addressed?
Clearly the industry is making itself safer on a weekly basis through self-regulation and multiple state regulations. Can we do better? Absolutely! So what are the primary opportunities to make huge leaps forward toward better service and better products for our patients and customers?
We suggest these are the top 5 for you to consider. See if you can answer YES to each of these:
Do I use a test lab regularly, with suitable sampling, and have they performed ‘FDA validation’ for their analysis procedures so I know they are giving true values?
Is the cannabis product produced regularly in the same way so that the product is predictable and do I follow Good Agricultural Practices (GAP)?
Am I always honest about having safe and clean product for my customers?
Do I know all the state rules and regulations and am I and my workers following them in all parts of my operations?
Have I protected myself and my workers from adverse working conditions?
If you can say YES to all 5, then give yourself a hand, and keep looking ahead, so you can stay ahead.
Steve Goldner was Supervisor Forensic Toxicologist at Office of the Chief Medical Examiner, New York City while working on the team that developed the first commercial laboratory chromatography tests for drugs, which helped launch the drug screening industry in the 1970s. He then formulated the drug methadone with his mentor John Broich from Brookhaven Labs., got FDA approval and managed the drug company for several years. After earning his law degree at Quinnipiac University Law School and practicing law in Connecticut, he specialized in gaining FDA approval for new medical technologies, foods, drugs and medical devices. His consulting firm, Regulatory Affairs Associates, became members of NCIA in June 2015, and has helped get over 240 products approved by FDA which launched many new companies. He also has served as FDA Expert Consultant to the National Institutes of Health and advises testing labs, food and drug companies on FDA, State and International compliance.
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consumption (think wise use of resources) and unique experiences designed for purposeful feeling.
