The Small Business Tax Equity Act: Supporting a Just Cause at NCIA Lobby Days

by NCIA Editorial Staff

The American cannabis industry should be proud of generating thousands of jobs and billions of dollars in tax revenue for America- but can you imagine how much more we could do without the 280E tax burden?

While it’s an exciting time to be in the cannabis industry, our businesses are struggling under crippling federal taxation. It’s all due to Section 280E of the IRS tax code. A provision originally set out to penalize bad actors in criminal market. Unfortunately for our industry, the federal government has yet to remove the plant from its list of scheduled drugs and continues to deny cannabis as a fully legal product with medical benefits. In sum, if your business touches the plant then you’re in danger of losing your profits under Section 280E of the IRS tax code. It’s a critical time for us to come together and demand change for the industry at the federal level so our business owners can do what they do best; grow their business and give back to the community.

Despite the 280E difficulties, Portland’s MindRite dispensary was voted the most charitable cannabis store by DOPE magazine. Owners Shea and Jaime Conley said they would give even more if their business was taxed like any other industry.

MindRite can’t write off their tens of thousands of dollars in charitable donations because 280E hinders it. “It’s coming out of our profits but its just something we do and has never been up for debate because we believe it’s the business owner’s responsibility to make the community around them better, said Shea. The Conley’s also said they would jump through even more hoops and regulations because it’s a privilege to be able to work in an industry they are so passionate about. But the fact remains, “if 280E wasn’t over our heads,” he said, “we would’ve expanded our business by now.” Without 280E they would reinvest the money they paid the government. “We could have two more dispensaries open,” said Shea.

As tax professional Jim Marty of Bridge West explained, businesses can normally retain profits from usual business deductions such as; employee salaries, utilities, facility rent, payments to contractors, and health insurance premiums. For those in the green space, anything outside of the cost of goods sold is not deductible. In efforts to level the playing field, Jim works with clients and lobbyists at the state level to allow for deductions. “We’ve testified in front of committees,” he said, “and some state tax rates are lower than the federal.” In prior interviews with CNBC and FOX Business, his advice is to understand your business plan because 280E creates an impossible situation for legitimate cannabis businesses.

State tax rates may be lower than federal in states like Colorado and Oregon, however, it’s not enough to offset the penalty they pay at the federal level. “We are aware of every dollar that goes out and comes in, it’s a must if you want longevity for your business,” said Shea. The dispensary deals with razor-sharp profit margins in anticipation of paying their penalty to the IRS every April.

It’s frustrating for business owners and employees. Mitch Woolheiser of Northern Lights Cannabis said his business growth is stunted as a direct result of the issue. “I can’t give my employees raises. I can’t put money back into my business. Instead, I’ve been hoarding cash in anticipation of what the IRS is going to take,” he said. In total, cannabis businesses are paying taxes on gross income which often amounts to paying rates that are 70% or higher. Comparatively, the corporate tax rate established by The Tax Cuts and Jobs Act of 2017 is only 21%.

That’s why we are once again taking to the steps of Congress in May for our 8th annual Lobby Days in Washington D.C. While in D.C., Jim said he hopes to meet with President Donald Trump. He said if the executive branch has authority to reschedule marijuana, he’d ask President Trump to categorize cannabis as a Schedule 3 substance or unschedule it completely because it would ensure that section 280E would no longer apply.

We also encourage everyone in support of a healthy, prosperous cannabis industry to talk to their Senators and Representatives about The Small Business Tax Equity Act. The amendment would exempt compliant cannabis businesses from the 280E provision which we believe would inevitably lead to in an influx of employment opportunities with more competitive salaries.

Member Spotlight: MindRite PDX

For the month of September, we’re highlighting NCIA members MindRite PDX, a marijuana dispensary located in northwest Portland, OR. Owners Shea and Jaime Conley manage a true “mom-and-pop shop” in the cannabis industry, with the intention of representing the industry respectfully and responsibly. Most notably, within the last year they agreed to allow TV host John Quinones from “What Would You Do?” to make their dispensary the center stage for an experiment into whether passers-by would illegally buy cannabis for actors pretending to be underage.

Cannabis Industry Sector:
Cannabis Providers

NCIA Member Since:
January 2016

Tell us a bit about you and why you opened MindRite PDX?

Shea and Jaime Conley, MindRite Dispensary

My husband Shea and I are the co-founders and sole proprietors of MindRite Medical Marijuana Dispensary in Portland, OR. Each of us has had a passion for cannabis and its medicinal benefits for almost our entire lives. We have both received many benefits from cannabis over the years, from general stress reduction to complete medical relief of my grand mal seizures and his migraines. We both previously worked in retail and hospitality for many years and had success managing, growing, and creating a positive work environment for our employers, but often felt unsatisfied and unrewarded.

When we realized we could enter into the cannabis industry together, following our passion for the products and realizing a dream of helping our community through a new avenue of health and wellness, while fulfilling our entrepreneurial spirits, we jumped in head first. Now we are successfully living and working in our own neighborhood and are excited to be at the forefront of the Oregon craft cannabis industry.

How does MindRite PDX provide unique value to cannabis consumers?

MindRite has developed a reputation for having the best medicine selection in Portland (voted Best Medicine Selection, Dope Magazine 2016). First, we set out to source our craft cannabis from across the entire state of Oregon, getting product from a select variety of micro-climates and elevations that provide some of the best natural environments for quality cannabis in the United States. We pride ourselves on having unique, small-batch strains that aren’t easily found elsewhere and supporting the small grower who has been honing their skills and refining their products for years. We have established strong relationships with some of the best grows in Oregon and through these relationships we’ve managed to keep cost to a minimum, translating that savings to our patients and now customers. We have had the same pricing structure and the same flower prices since the day we opened, not including the mandated taxation. Essentially, we are able to provide the highest echelon of product at the most affordable prices for our guests.

Secondly, we have made our customer care equally as important as the quality of our products. Our amazing staff shares our passion for cannabis, our desire to educate our neighborhood, and our commitment to providing safe, professional access to all things cannabis. When we originally opened, the staff decided as a group to pool all gratuities from patients (and now guests) into a charity fund, donating all of this money to a local charity of our choice. MindRite loved the idea and has fully matched every donation, helping our city by giving back several times a year.

In this last year, your place of business was featured twice on the popular television show “What Would You Do?” with John Quinones. Can you tell us what that experience was like and any lessons you learned from participating?

“What Would You Do?” TV still photo

The show was doing a special Portland edition and looking for a dispensary that was willing to participate during October 2016, for the first month of recreational cannabis sales. After many conversations regarding the content and overall tone that our business, but more importantly the cannabis industry as a whole, would be portrayed in, we decided to move forward with the shoot. We made it clear that we wanted to present the true cannabis consumer, the professional environment that cannabis can be provided in, and the importance of the medicinal benefits of the cannabis plant as well. Only after the entire production crew became daily guests at our shop (while scouting and shooting other scenarios in town) did we feel comfortable moving forward with the show.

The show’s premise is to see what someone will do in an unusual situation, using hidden cameras and actors to portray these awkward moments with the general public. They set up hidden cameras throughout our corner and inside our waiting area, having several actors (who were of legal age) pretending to be underage and asking passers-by as well as customers to purchase cannabis for them. We realized the risks we were taking with our business and the industry but felt confident in our community’s integrity and respect for safe access to cannabis.

Overall we were very happy with the final outcome of the show and felt that the risk of negative portrayal was well worth breaking the stigmas that have been deeply ingrained for many years about cannabis across the country. The producers did not tell us that the actors would also be offering additional money to coerce people to make purchases for them; we would have absolutely said no, as that is baiting and doesn’t accurately reflect the social experiment they were trying to depict. Regardless, it will continue to take mainstream media’s influence and cooperation of cannabis industry leaders to change unnecessary stigmas and misconceptions of this amazing plant and the people that benefit from it everyday.

Why did you join NCIA? What’s the best part about being a member?

Jaime and Shea Conley with Congressman Earl Blumenauer (D-OR)

We were introduced to NCIA through a personal friend [NCIA’s Bethany Moore] who had been working with NCIA for a few years. While we were building out our shop for opening, she invited me to an NCIA member networking event in Portland. It was an eye-opening experience to be in a room full of cannabis providers and consumers who were the leaders in every facet of the cannabis industry.

Seeing such a diverse, well-organized, and professional group was inspiring and fueled our passion to move forward. I can describe it best by saying we had “found our tribe” in every way. That has been the biggest benefit to becoming a member of NCIA – networking and participating with the business professionals of this ground-breaking industry!