Why Cannabis Dispensaries Call Transactions “Donations”

You spend hours learning about the differences in marijuana strains, products, uses, laws, and more, only to find when you finally visit that the store accepts donations, not transactions. There is no denying that the cannabis industry is weird. Just navigating your way around a Cannabis dispensary needs knowledge, if not total guidance. So why donations? You are buying weed, a legal transaction, or are you?

Understanding the Cannabis Industry

Before the Adult Use of Marijuana Act, or AUMA, came into effect at the end of 2016, medical dispensaries operated on a non-profit basis, as non-governmental organizations. Because it was illegal to sell weed, even medicinally, legitimate patients operated as collectives, where they volunteer time and excess harvest in exchange for medicine and donations to cover basic operating costs.

According to the Commission on Peace Officer Standards and Training, AUMA changed that by creating a framework to control, regulate and tax recreational marijuana, thereby rendering the non-profit requirement of medical dispensaries obsolete. However, because cannabis remains illegal federally and causes a myriad of financial woes for pot companies, the donation-based model remains.

Challenges of Marijuana Business

California imposes so many regulations on weed companies, some of them incredibly expensive, that many dispensaries make barely any profit. Few “rake it in.” Most struggle to comply with all state requirements, spending money instead on pricey camera systems, security guards, costly tests, and exorbitant taxes, mostly to make it easier for regulators to monitor everybody’s business. That is not all:

Banking Services

To add insult to injury, most pot companies cannot even access the most basic of financial services. Every other business can transact easily, even earn interest, including tobacco and liquor stores. Federal law forbids banks from servicing cannabis companies; since the plant remains a Schedule I drug that, according to the Drug Enforcement Administration, is illegal under the Controlled Substances Act.

For this reason, banks refuse to service businesses operating in the cannabis industry. They do not earn interest. They cannot transact with customers. They cannot even open a simple business account. Until federal law changes, big banks fear federal repercussions if they service cannabis-related monies. Working on a cash-basis under the guise of “donations” is the only way dispensaries can operate.

Tax Deductions

Once again, federal law causes problems for legal marijuana dispensaries in states like California, which allows its sale. Any other business qualifies for tax deductions in the United States, except for pot shops, that is. The Internal Revenue Service will not permit any tax deductions for marijuana companies since they are generating income while flouting federal law. Accepting “donations” offers a tiny loophole.

Conclusion

Visiting a cannabis dispensary may feel confusing, even overwhelming, at first, but you will quickly learn your way around one soon enough. Until the federal government legalizes cannabis or removes it from the Controlled Substances Act, legitimate weed companies in states with liberal laws continue to suffer this oppression, even outright persecution.

For consumers, these laws do not change your freedom to buy weed in states that allow it, but it may make visiting dispensaries a unique and fun experience. Just remember to take cash with you, since most operate within a cash-only system. You may find dispensaries willing to charge your card if you are lucky, but all prefer donations, at a set retail price, of course than actual sales.