But becoming a taxpaying, regulation-observing business has its challenges for an operation like theirs that may make applying for a license more trouble than it is worth. They are not alone: Our writer Margot Boyer-Dry says thousands of cannabis entrepreneurs across the state face the same issues.
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Chris Alexander, the executive director of the New York Office of Cannabis Management, wants businesses like Buddy’s in the new, regulated industry. “If you’re not successful at pulling the legacy market into the legal market, you limit your tax revenue — and the money you can redirect to impacted communities,” he said. Black and Latino New Yorkers have been far more likely to be arrested on marijuana charges than white, non-Hispanic people, and the state is setting aside half of all marijuana-related licenses for people in communities that were disproportionately affected by the drug wars.
For now, wholesalers like Buddy’s are awaiting instructions on how to apply for licenses.
And there are potential complications. States like to license businesses with track records, but Buddy’s revenue is off the books, so without an official pardon from the government, it can’t actually show its earnings — or dedicate those earnings toward start-up costs — without risking attracting the attention of the Internal Revenue Service. “There’s no statute of limitations on taxes,” said Jason Klimek, a tax lawyer specializing in cannabis at Barclay Damon.
The costs for a newly licensed business are high — opening a dispensary is estimated to cost between $500,000 and $1 million, Klimek said — and start-up money is difficult to come by. Bronson and Cantillo don’t have much financial padding, and since marijuana is still illegal on the federal level, most banks won’t give them loans — or even open a bank account.
With a license, they would be responsible for maintaining and filing documents like financial statements, the same as other businesses. They would probably need to keep comprehensive records on each plant — where it has been from seed to sale. “It’s a whole new world of information you’ve got to navigate,” said Joe Rossi, who leads the cannabis practice at Park Strategies, a lobbying firm that is working pro bono to help Bronson and Cantillo apply for a license.