If you’re doing business with a medical marijuana company, your bank may charge you high fees or refuse to do business.
David Smith, owner and president of Smith Patrick CPAs, recently joined publisher Craig Kaminer and host Sarah Fenske on St. Louis on the Air to discuss the banking challenges of the Missouri cannabis industry. The radio show is on St. Louis Public Radio.
What’s Going on with Cannabis Banking?
Missouri voters legalized medical marijuana in the state nearly three years ago. Since then, the cannabis industry in St. Louis is growing, with state-regulated dispensaries opening up throughout the region. However, managing the finance and tax side of the business is a challenge—not just for the cannabis businesses themselves—but also vendors providing them services.
David Smith has been involved with the Missouri Cannabis industry, serving on the board of the Missouri Medical Cannabis Trade Association and testifying before Missouri legislators on tax-related cannabis issues. In addition to offering resources related to taxes, Smith and his colleagues at St. Louis-based Smith Patrick CPAs consult with a number of local cannabis businesses when it comes to industry-specific banking issues.
Highlights of the Cannabis Banking Radio Show
- Smith explained to St. Louis on the Air that banks are allowed to bank in the cannabis space, but they’re held to “a higher standard of documentation,” like cannabis businesses themselves. This is due to federal regulations, which still list marijuana as a Schedule 1 drug.
- Banks are focused on mitigating risk, so they won’t accept cannabis money, or insist on charging them significant fees if they do.
- Smith suggests that cannabis businesses look to smaller banks, usually non-public banks to work with as they may high tighter control on documentation.
- He also mentioned that there are services that act as an overlay to banks that may not want to operate in the cannabis space directly. These services “will be the overlay and handle the compliance on behalf of the bank.”
Legislation to Watch
But even as Smith counsels businesses to individual solutions, he’s looking to legislation, the SAFE Banking Act of 2021, that could be a game changer, if approved by the U.S. Senate.
“[In] the current environment, the fear of sanctions has kept a lot of banks and credit unions from supporting this industry,” Smith said on St. Louis on the Air. “But what this SAFE Banking Act does is it reduces those restrictions, provides safe harbor, and does allow the banks really to continue to operate in these state-legal businesses, even as they’re illegal on the federal level.”
The potential passage of the federal bill are important not just for financial reasons but when it comes to safety, given the dangers inherent in dealing with a lot of cash, Smith explained.
Listen to the full discussion on St. Louis Public Radio.