Page 30 - BusinessWest January 22, 2024

ity of the Controlled Substance Act on intrastate activity. Basically, the suit alleges that the federal government has no say what happens within state bor- ders,” Sanders told BusinessWest. “I wasn’t aware of this lawsuit until some- body recommended me to be part of it. So we had substantial meetings with our legal team and our board about this particular issue, and we all felt like there’s something here, and that this is an important way to approach it.”
Tough Environment
Cannabis banking has softened somewhat in Massachusetts, Sand- ers was quick to note. “I would say
Massachusetts is probably one of the friendliest banking states in the United States as far as cannabis. We have a lot of very thoughtful, kind, smart bank- ers out there that are trying to service the industry. And that’s great; we have checking accounts, we have saving accounts, some of us are able to do debit-card acceptance. But we can’t take credit cards. I can’t get a business loan. Equipment loans are out there, but they’re at a really high interest rate. And also, I can’t get access to normal payroll services. So I can’t work with an ADP or a Paychex or some of the big guys that are really good at what they do.
“If you’re signing up to be in can-
nabis, you’re signing up for all of these headaches. This is the nature of the beast. And it’s not negotiable; those are the facts. This is what we have to deal with every single day. And it’s really, really hard.”
The lawsuit also takes aim at what’s known in the IRS tax code as Section 280E, which originated from a 1981 court case in which a convicted cocaine trafficker asserted his right under feder- al tax law to deduct ordinary business expenses. In 1982, Congress created 280E to prevent other drug dealers from following suit.
So, while state-legal cannabis busi- nesses are allowed to deduct the cost of goods sold when paying taxes, they
can not take other deductions normal to most non-cannabis businesses — sal- aries, health insurance, utilities, main- tenance, and much more. “So I have an effective tax rate of 73%,” Sanders said.
In 2005, the U.S. Supreme Court rejected a challenge to the Controlled Substance Act’s cannabis prohibitions.
But, according to a press release announcing the new lawsuit, “a criti- cal factor in that decision, Gonzales v. Raich, was that the federal government intended to ‘eradicate’ the market for cannabis nationwide. The court con- cluded that the federal goal of eliminat- ing commerce in cannabis, combined with the assumption in 2005 that intra- state marijuana could not be differenti- ated from interstate cannabis, justified the Controlled Substances Act’s prohi- bitions on intrastate cannabis. Neither of those facts, however, are true today. In the 18 years since Gonzales, Con- gress and the executive branch have abandoned any intent to ‘eradicate’ can-
“This unjustified and unconstitutional prohibition on intrastate cannabis harms plaintiffs and hinders the efforts of states to provide patients and adults with access to strictly regulated and tested cannabis.”
nabis, and numerous states have devel- oped regulatory programs for legal marijuana that is not fungible with, and is readily distinguished from, illicit cannabis.”
Indeed, the plaintiffs note, today,
38 states and Washington D.C. have medical or adult-use cannabis pro- grams with significant regulatory oversight, requiring compliance with stringent regulations aimed at protect- ing patients, customers, and the public, including video surveillance and seed- to-sale tracking.
“Absent the relief sought in this law- suit, plaintiffs and other state-regulated cannabis operators will continue to suffer severe harms,” the release notes. “State-regulated cannabis businesses are deemed illegal under the CSA; their everyday activities are considered fed- eral crimes. As a result, they are cut off from numerous federal programs and protections (including small-business loans), they are subject to discrimina- tory tax penalties, and many organiza- tions — including banks and credit-card processors — refuse to do business with them, rather than risk being deemed conspirators, aiders and abet-
Lawsuit >> Continued on page 31
30 JANUARY 22, 2024
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