Last month Mexico announced that it was unconstitutional to prohibit the use of marijuana for recreational purposes. It seems that western civilization is slowly leaning towards the decriminalization and regulation of the drug. While Mexico is one of the main highways that supply the US with drugs, the marijuana market in Mexico is considerably smaller. Only 1.2% of Mexicans allegedly smoke marijuana, compared to 12.6% in the US.
Therefore, I wanted to analyze the decision of starting up a marijuana retailer in the US considering the social and political landscape that envelops the country (leaving all the ethics regarding its legalization aside).
It has been wildly publicized that states obtain large revenues from taxing marijuana. However, contradictory to popular belief there is only a “10% retail tax on marijuana and 15% excise tax for large wholesale weed”. This means that an average marijuana dispensary has profit margins of around 32%. However, “state and local marijuana taxes sum to a confiscatory 29%”, meaning that one of the major expenses regarding a marijuana clinic is simply paying taxes.
The aforementioned facts may seem daunting at first, but I believe that the main problem is related to how banks perceive the industry. Since marijuana still remains illegal under federal US law, many banks do not want to lend money to dispensaries or allow them to deposit money. Expanding your business, therefore, is halted by the inability to properly manage your finances. Many dispensaries have to keep their earnings in cash, meaning that managing the money turns out to be a huge hassle. Moreover, it may be difficult to start up a business without a loan from the bank.
Even though the marijuana industry within states that legalize its recreational consumption is booming, I believe that big dispensary firms will not start to appear until banks decide to accept cannabis money.
