rocket domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /home/leftri6/public_html/wpexplore/wp-includes/functions.php on line 6131megamenu-pro domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /home/leftri6/public_html/wpexplore/wp-includes/functions.php on line 6131acf domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /home/leftri6/public_html/wpexplore/wp-includes/functions.php on line 6131To provide some clarity on this new fee for cannabis retailers located in Colorado, we answer some of your commonly asked questions.
As we stated, this new charge impacts tangible property, including cannabis products, that are delivered to a location within the state of Colorado by a vehicle. It is $0.27 per sale (regardless of the number or value of the items delivered).
It does. CDOR defines tangible personal property as “all goods, wares, merchandise, products and commodities, and all tangible or corporeal things and substances that are dealt in and capable of being possessed and exchanged.” While several things are exempt from sales tax, cannabis products are not included — thus, this delivery fee applies to cannabis too.
Whether you use a company-owned vehicle or a third-party organization, every seller must collect this 27-cent fee from its customers. The company facilitating the transport of cannabis products bears no responsibility for the fee.
Yes, wholesale transactions (or other tax-exempt purchases) don’t have to collect the retail delivery fee. This includes wholesale cannabis deliveries, making them exempt from the delivery fee. Sales of exempt tangible personal property (i.e., items for resale) will be exempt from the fee unless one item of tangible personal property subject to sales or use tax is included in the delivery. In that case, the delivery fee would apply.
Both the buyer and the seller, in a way — as the seller of the item(s) being delivered, you must collect the fee. But the customer is responsible for paying the fee once you have charged them — and it must be listed on your invoice as a separate item (shown on the receipt as “retail delivery fees”), so there is full transparency.
Businesses that have a sales tax collection obligation are required to also collect the delivery fee in addition to sales tax. If your business has already registered for sales and use tax, then you will automatically be registered for this additional retail delivery fee (with a Retail Delivery Fee Account). As mentioned above, third party delivery companies that would not otherwise charge sales tax, are not subject to this new fee.
The fee must be reported on its own return called the Retail Delivery Fee Return (DR 1786), which is separate from the state-wide Colorado Sales and Use Tax System (SUTS) return or other local Colorado returns. However, both are due on the same date, or by the 20th day of the month after the reporting period. There are plans to incorporate the return into SUTS, but the feature will not be available until later this year.
No. CDOR has generously decided to provide some leniency, as it received feedback that listing and collecting the fee by the July 1 start date would prove challenging. Informal guidance says if you fail to separately state the fee, you will not incur penalties or interest — given you do the best you can to implement the separate statement requirement.
The buyer will still be required to pay the fee whether you collect it from them or not, and you, the retailer, will still be responsible for remitting the fee for any transactions made on or before July 1, 2022, even if you did not charge it to the buyer.
There is no question this fee, imposed while the country is experiencing record-setting inflation and sky-high fuel prices, has caught consumers and businesses alike by surprise. While you, the seller, do not have to pay the fee, your potential customers do — and this impacts everything they buy that gets delivered (including restaurant delivery). These add-ons will stack up, and with Colorado’s cost of living already rising, consumers may have to start budgeting, indicating this could affect your bottom line in the future.
If you have any questions about the new fee, such as how to file this separate tax return or collect the tax from your customers, contact MGO’s team of Tax professionals.
MGO is positioned as a national leader in both tax advisory and cannabis accounting and financial best practices.
Ilias Savakis is a State & Local Tax Manager at MGO. He has over five years of experience in Sales and Use Tax compliance and consulting. Contact Ilias at ISavakis@mgocpa.com.
]]>By Hershel Gerson, CEO of ELLO Capital
Cannabis is really two markets: one focused on medical use and one focused on adult use. There’s plenty of overlap. In states where cannabis is legal for both uses, dispensaries make little distinction in their display counters. Investors, however, are showing a distinct preference for companies focused on the adult-use market over medical. From 2017 through mid-May this year, investors poured $1.8 billion into adult-use focused companies according to data in the MGO | ELLO Cannabis Private Investment Review, powered by PitchBook Data. By comparison, the medical segment trailed markedly, with $730 million total invested over the same period.
By some measures, this gap isn’t surprising. The market for adult-use cannabis is sizable and growing: Americans will spend about $12.5 billion on adult-use cannabis this year, an increase of one-third over 2018. And the potential for growth in the years to come is significant as more states legalize adult use. Cannabis is also becoming a fundamental ingredient in products such as beer and energy drinks, edibles, and balms, expanding the adult-use market even further. Increasing recognition of the potential within the adult-use market is accelerating investor activity in the sector. In the first four-plus months of 2019, private equity and venture capital investment in adult-use cannabis companies topped $862 million, according to data in the MGO | ELLO Cannabis Private Investment Review.
At the same time, investors shouldn’t lose sight of the long-term potential of the medical cannabis segment. Medical-use cannabis is a large and growing market, which should see an almost 25% gain in revenue this year to about $4.7 billion, according to the 2019 Marijuana Business Factbook. Medical cannabis has the advantage of overwhelming public support – a recent Quinnipiac University poll showed a solid majority of Americans under 65 support medical marijuana generally, with 93% of all Americans expressing support for medical cannabis if prescribed by a physician. Such a consensus bodes well for the segment.
Expanding medical cannabis to new states is likely to be a smooth process, at least compared to adult-use legislation, since there are already ample models of successful regulatory structures across the 33 states where medical cannabis is legal today.
The growth potential for medical cannabis goes beyond expanding to new states. The pharmaceutical and biotech industries have barely scratched the surface of what cannabis could offer as a medicinal ingredient. The Marihuana Tax Act of 1937, which made cannabis illegal in the U.S., also stifled nearly all academic and pharmaceutical research. Despite the fact that cannabis is known to have been used for medical purposes for some 4,000 years, as a Class I controlled substance, the government’s official position on cannabis is that there is “no currently accepted medical use.” Medical professionals only began to crack open that closed door in the last decade, as a critical mass of patients with chronic pain have reported benefits from using cannabis.
The biggest progress came last year when GW Pharmaceuticals developed the first U.S. Food & Drug Administration approved plant-derived cannabinoid (CBD) medicine, Epidiolex, which treats seizures. The fact that there is now an FDA-approved CBD drug on the market should give investors hope that restrictions on medical research on cannabis are easing, if slowly. Despite the limitation in the U.S. on cannabis medical research, it’s a sign of the biotech potential for the plant.
This sets the scene for investors to view cannabis through the ‘slow and steady’ lens that applies to most pharmaceutical efforts. While that growth might be slower than traditional biotechs because of cannabis’ evolving legal status, the potential could earn companies the same kind of improved valuation as traditional biotech firms. And like pharma overall, the medical cannabis segment offers both long-term value creation opportunities and the potential of a blockbuster drug that generates $1 billion or more in annual revenue.
In the long term, the potential of both adult-use cannabis and medical cannabis is tremendous. As a very broad comparison, the global alcoholic beverage market is about $1.3 trillion while the global pharmaceutical market is about $1.1 trillion. Those two markets have very different growth rates, risk profiles and valuation benchmarks, offering investors multiple opportunities to capitalize on cannabis’ growth.
]]>To help cannabis entrepreneurs and investors keep up with the fast pace of change in the cannabis industry we will be providing monthly summaries of the latest regulatory and legislative news to provide a snapshot of latest happenings while also highlighting matters of interest looking forward.
This month the focus is on prominent federal legislative activity (e.g. the SAFE Act and the STATES Act), state legalization measures (e.g. NJ, NY, IL, and others), and two bills in Colorado that have the potential to attract out-of-state investment to that market.
With control of the House of Representatives being transferred to the Democratic party, several bills that have the potential to profoundly impact the cannabis landscape have advanced in Congress. For example, the last week of March saw the House Financial Services Committee move forward the Secure And Fair Enforcement (SAFE) Banking Act to a full House vote, reportedly “within weeks.” Following the momentum of the House bill, U.S. Sens. Jeff Merkley (D-OR) and Cory Gardner (R-CO) have introduced the companion bill in the Senate.
The latest SAFE iteration addresses the cannabis banking crisis and includes amendments that offer protection to insurance companies and other financial services companies.
The banking issue is long-standing and predates even the implementation of recreational cannabis in the US. The lack of straight forward access to fundamental banking services for the cannabis industry creates a multitude of challenges, most notably the operational and financial difficulties of a multi-billion-dollar industry operating almost entirely in cash. This has obvious implications for public safety and potential diversion to the black market, among other concerns.
The inability to access banking services is often identified as a major hindrance to market entry for large and well-resourced corporations and removal of this barrier could herald a seismic shift in investment into the cannabis industry. At time of writing the House Bill had 152 cosponsors, including 12 Republicans, whereas the Senate bill has 20 co-sponsors.
Adding further momentum to the SAFE bill, last week Last week, Secretary Steve Mnuchin offered his support for a legislative fix for the banking issues facing the cannabis industry. “There is not a Treasury solution to this. There is not a regulator solution to this,” he said. “If this is something that Congress wants to look at on a bipartisan basis, I’d encourage you to do this.”
Another potentially substantial piece of legislation is the Strengthening the Tenth Amendment Through Entrusting States Act (STATES Act), which aims to reduce conflict between federal and state laws as they relate to cannabis. The STATES Act is a potential gamechanger for the cannabis industry, allowing legal certainty for companies seeking to operate in dozens of jurisdictions across the US.
Although this legislation stalled in December, it was reintroduced on April 4th, alongside other measures, which include:
The extent to which these bills have bipartisan support may be crucial if they are move beyond the House.
It has been a mixed month in terms of advancing cannabis legalization measures at the state level. On the one hand, there has been progress in multiple states, such as Connecticut, Illinois, and New Hampshire. While on the other hand there was a couple of snags holding up the implementation of recreational markets in New Jersey and New York.
Recent adult-use cannabis legalization headlines include:
Despite the hiccups outlined above, there is a clear trend towards legal cannabis across the US. Moreover, several states took steps towards expansion or liberalization of their medical cannabis markets. Certainly in the long term, the outlook is optimistic for the cannabis industry on a number of fronts.
When Colorado became the first state to implement an adult-us cannabis framework in 2014, out of state investment was restricted. This allowed the state to build upon its existing medical cannabis market.
The understandable caution has since been questioned, however, and a Bill offering more flexibility in investment passed both the Colorado House and Senate in 2018, only for then Gov. Hickenlooper to veto it. In 2019, a replacement Bill was introduced and has recently passed its third reading in the House unamended.
As an established market with mature regulations and market stability, Colorado has low-risk potential when compared to emerging markets in other states – although competition is likely to be strong, with ever-thinning margins as prices continue to drop in the state.
Out-of-state investors exploring options in Colorado may be interested in acquiring social consumption licenses in Denver, or seek opportunities for market expansion in the delivery segment of the market. If passed, HB19-1234 would allow licensed dispensaries to offer these services for the first time.
]]>MGO Technology Group has leveraged contacts from the dark web, conversations with federal authorities, and other proprietary research and insight to provide an overview of the leading cyber threats cannabis enterprises face.
Information gathered by MGO Technology Group from underground assets and federal investigations indicates that, to date, there is no specific group actively targeting the cannabis industry. But there are hackers focusing on three areas within the seed-to-sale lifecycle:
Investigations revealed two incidents where intellectual property was stolen by a former employee due to partial or ineffective security practices. In addition to potential malicious insiders, external threat actors are expected to attack the research portion of the industry in order to steal intellectual property. Potential targets of hackers include strains being developed, marketing strategies, and technology practices related to cultivation.
The loss or modification of proprietary information, such as strain development and cultivation methodology, could severely impact the production of future products, result in a tampered or inferior product, or the loss of competitive advantage within the industry. While an increased timeline for a future product or loss of IP to a competitor would result in a negative financial impact, the release of a tampered product could also cause a negative reputational impact as well.
The search for payment solutions in the notoriously cash-heavy cannabis industry has led to the emergence of a number of payment systems. While they may be convenient, they are a high-risk target for hackers. Mobile applications that are not securely developed or have appropriate oversight are at risk and provide an attack vector for malicious actors. The success breaching of an application could provide access to customer financial information, leading to mistrust of the application author and discontinued usage.
As the legalization of medical and adult-use cannabis spreads across North America, the customer base will continue to expand making retailers increasingly high-priority targets of malicious actors. Medical information and Protected Health Information (PHI) are already highly valued assets for cyber-criminals.
Similar to other small businesses and early stages of a new industry, the protection and security of computers and networks involved with customer information is minimal or inefficient. Specifically, this involves the Point-of-Sale system and supporting infrastructure, two of the most targeted assets, a breach of which would result in the theft of customer information. Once again, a breach of customer information, especially PHI, will not only have a negative impact to the reputation of the retailer and industry overall, but could result in HIPAA violations resulting in millions of dollars’ worth of fines.
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