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Marijuana Dispensaries Put Colorado Banks in a Bind

Colorado dispensaries have to pay sales tax bills in cash
Marijuana Dispensaries Put Colorado Banks in a Bind
Photo illustration by 731

Every month, Elliott Klug or one of his business partners walks into the Colorado Department of Revenue with a messenger bag holding thousands of dollars in cash and waits as state employees start counting. Klug, co-founder of PinkHouse Blooms, a chain of five medical marijuana dispensaries in Denver, has to pay his sales taxes in cash because federal law bars banks from offering accounts to pot shops, even though they’re legal in Colorado. “It highlights the awkward situation we’ve been placed in,” Klug says. “We are paying taxes, but despite our best efforts to be good citizens, we’re still paying in cash.”

Colorado is among 18 states that allow medical use of marijuana and 11 that permit sales through dispensaries like Klug’s. Yet federal law labels the drug a controlled substance and requires banks to report pot-related transactions as suspicious. The inconsistency creates a gray area for dispensary operators, who have to run as cash-only businesses susceptible to robbery. The conflicting rules are “encouraging cash operations, which are a threat to public safety and much more difficult to track and audit,” says Aaron Smith, executive director of the National Cannabis Industry Association. “We’re just looking for a solution where we can bank legitimately like any other industry.”