Category: aBIZinaBOX Inc. and Jordan S. Zoot

The Santa Barbara County Grand Jury issued its 2019-2020 Final Report on June 30, 2020. The last section of this Report is devoted to the County’s actions relating to the cannabis industry. This last section of the Report is a scathing indictment of the manner in which greed for money and power influenced the governance of Santa Barbara County in its adoption of ordinances relating to cannabis. The following is introductory summary of the Report.

Why is California’s cannabis industry in a state of chaos 2+ years after adult-use sales of cannabis were legalized?  Why did California fail so badly in transforming a stable, lightly regulated medical cannabis industry into a heavily regulated medical and adult-use cannabis industry?  Why is California’s underground cannabis industry booming while its legal cannabis industry is struggling?  Why do so many self-anointed cannabis experts distribute so much advice of so little value?  Why have the Equity Programs that were expressly created to assist and subsidize economically disadvantaged individuals with start-up cannabis businesses had so little success?

While we stand behind our criticism of Harborside’s original tax counsel, Harborside has made a grievous error in changing counsel.  Harborside’s new tax lawyers lack adequate education and experience in federal tax law and accounting to pursue this appeal.

Salvaging Equity Programs – this is our fourth article relating to the impact of the COVID-19 crisis on the cannabis industry.  This will not be our last article on this topic.  We initially anticipated only four, but we now see additional issues.

This article is the third of four articles that were prompted by the COVID-19 induced depression’s acceleration of the collapse of the cannabis industry. Our second article explained how the financial efficiency of store-front and delivery-only dispensaries is improved through operational and structural and changes to these businesses. In a depressed, highly competitive business economy, economic efficiency will be critical to long-term success. This article describes techniques for enhancing financial efficiency in the movement of cannabis from cultivator to consumer.

We have published a number of articles over the past two years that explained how the impact of taxes on the cannabis industry could be minimized. We specifically addressed Internal Revenue Code (“IRC”) §280E in a couple of articles. See Analysis IRC Sec. 280E and a post-Harborside decision discussion in Dispensary Taxes – Post Harborside. Many in the cannabis industry contend that IRC §280E handicaps the ability of the industry to compete with the underground market. This contention is a red herring. IRC §280E complicates making money in the industry. As a consequence, IRC §280E is a serious handicap for some. For the well-advised, IRC §280E provides an opportunity.

This is the first of four articles we have been writing while sheltering-in-place. This first...

We were prompted to write this note by the article “Cannabis Regulation: The Struggle of Small Farmers,” written by Lance Griffin and published on February 21, 2020, in Terpenes and Testing Magazine. We were prompted to write this article not for what Lance Griffin’s article says but for what it does not say.

WAKE UP CALIFORNIA!, On February 14th the Los Angeles Times published an article by Joe Mozingo entitled “Cannabis Farm Was a Model for California’s Legal Industry”. Then Came a Sheriff’s Raid.” The article suggests the law enforcement officers who executed the search warrant were surprised by extent of the criminal activity at this “model” cannabis farm. Wake up California! Wake up Santa Barbara County!

The merriment of the holiday season has not overtaken California’s cannabis industry as 2019 comes to a close. The Legislature, Governor Newsom’s office, cannabis regulatory agencies (principally BCC, CalCannabis, CDPH, and CDTFA), law enforcement agencies, and a multitude of other groups and individuals interested in this industry have been confronted with the reality of a disaster. To paraphrase my father’s recurring admonition when something I attempted went wrong, “It is your own damn fault because you did not think it through.”

We are busy with a cross-country relocation, but we nevertheless felt compelled to make a quick comment in response to NORML’s knee-jerk December 23, 2019, post.

Our interest in California’s cannabis industry extends far beyond taxes. We have a substantial personal and historical perspective relating to cannabis in California. Members of our staff have been involved in California’s cannabis industry since Haight-Ashbury was the place to be in the mid-1960s. Members of our team have witnessed both the damage and the benefit of cannabis. Members of our staff have observed first-hand the injuries the federal government has caused through misguided, oppressive, and racist policies relating to cannabis. “Cannabis is a dangerous drug. Greed is also a dangerous drug. The combination of these two drugs is the principal reason for the chaos in California ‘s cannabis industry. Of these two drugs, greed is the more dangerous.”

A few days ago, we published a short note that described how a Cannabis Cooperative Association (“CCA”) could be utilized to circumvent the confiscatory nature of Internal Revenue Code (“IRC”) §280E[i]. Several our readers, including some purported experts, advised us that our suggestion would not work for them because the business organization with which they were involved pre-dated the enabling legislation for CCAs…………..Read the law! The California Legislature anticipated this problem.

Corporate Transparency Update. The focus of this column has been on the legal cannabis industry in California. However, many of our clients and regular readers are aware that our practice also focuses on……

The recent Tax Court decision in Northern California Small Business Assistants Inc. v. Commissioner [“Nor Cal”][1] made what is perhaps the most damning statements[2] yet regarding the application of IRC Sec. 280E to cannabis dispensaries. The Court stated……