Cannabis Industry Experts

Cannabis Industry Experts

STATE & LOCAL GOVERNMENT RELATIONS

Fighting Fires, Building Relationships, Shaping Policy.

CIMA Law Group – As one of the best Government Affairs Firm in Phoenix, we represent clients in the cannabis & hemp industry. We assist with application writing, state & local regulatory compliance, and real estate matters in the cannabis & hemp industry.

Our services include lobbying, business development, RFP & proposal writing, and election & political law. We consult with and advise C-Suite level executives, and an array of public and private entities regarding government relations, public affairs, and coalition-building. We help clients create pragmatic tools to achieve policy goals, and provide clients experienced and objective support across a range of policy matters.

Common Questions Clients Interested in the Cannabis & Hemp Industry

Q1. Do you have access to great real estate?

Assess factors such as population, people, distribution licenses, and dispensary competition. Demographics of the area must be reviewed such as the income level of the local population, seasonality, and location. Dispensary owners must determine if their location is “Amazon Proof” which means home-delivery won’t put them out of business as it could be illegal in certain areas. Each state and province will have their own legal mandates or zoning laws that restrict where a retail cannabis location can exist.

Q2. Where is the source for your product?

The basic approach is testing THC and CBD counts however cannabis focused states such as CO, WA, OR, CA, high THC and CBD counts are no longer the biggest driver of sales. Cannabis has cannabinoids and terpenes that create sensation within the users. The combination of those elements within each product, and an evenly distributed series of lines (both branded and white label) are critical for a loyal clientele.

Q3. Do you understand the history of cannabis in the area you are targeting?

With every town having its own experience with drugs, this will be critical in launching the business. For example, areas with severe opioid issues can have opposite viewpoints since cannabis plants have been proven to be an effective substitute for opioids. However, other areas may consider all products with a negative connotation of “drugs” which could potentially delay the start-up.

Q4. Have you rehabilitated a retail space before?

Where a typical retail store may cost $50,000 – $100,000 to properly beautify, a cannabis dispensary can range from $200,000 – $1,500,000 depending on the size, quality, condition, and uniqueness of the vision. Compound that with the fact that a bank is not going to help you with any of those costs, and you end up paying cash of your own, or that of your networks to get the job done.

Consequences to consider: Have you ever been responsible for a Gantt chart, choosing the right GM, and signing off on each of the necessary tradespeople? Have you had success in staying on budget? Do you understand the depth of the security protocols necessary given the regulatory framework? Have you navigated conflicting federal versus state versus local municipality rules when it comes to construction oversight in this space? Have you dealt with local opposition with NIMBY (Not in My Backyard – a phrase you should know in this industry) attitudes – people who will do anything to stop your construction project?

Q5. Do you understand 280E?

Section 280E of the Internal Revenue Code forbids businesses from deducting otherwise ordinary business expenses from gross income associated with the “trafficking” of Schedule I or II substances, as defined by the Controlled Substances Act.

Q6. Can you pass a background check?

Most states require background checks for operators and investors entering this industry.

 

Q7. What are the industry-specific scaling limitations or barriers to scaling your product or service?

Scaling limitations have to do with licensing requirements, particularly in handling cannabis. Before starting your business, get acquainted with what scaling will look like on a local level and national level.

Other Factors to Consider

The Cannabis Industry moves faster than any other industry, including events.

The speed of evolution of the industry presents both pros and cons. A con is that there is not enough time due to the unpredictability of the industry. There could be a situation where you are launching a new product and the federal government could announce “anti-cannabis”, which now makes that product illegal. One pro is the ability to try new and innovative things and because of its fast-paced nature, the entire industry changes every few months.

This is an emerging market. As such, consumer behavior is uncharted territory and changes every day.

One of the biggest challenges in the industry is capturing a large audience to get the sales needed when consumers are extremely undereducated on what they are buying. With social media blocking cannabis companies and mainstream advertising, it is extremely hard to reach a consumer, much less influence their behavior which is why PR is highly important.

Be prepared for banking issues.

Because dealing in cannabis is a federal crime, the majority of banks will not give you an account, or may even close your current account since the requirements to bank a company that is dealing in illegal activity is generally cost-prohibitive. Be sure to clear your business plans with your current bank or switch to a cannabis-friendly bank.

Many business expenses are not deductible.

Congress passed legislation to ban companies dealing in illegal drugs from deducting anything except their costs of goods sold. As a result, companies that deal in cannabis can be taxed at a rate of 70% or more. If the business is focused on plant-touching, the key is to allocate as much of your expenses as possible to the cost of goods sold rather than general business overhead.

Crossing state lines can cause issues.

Interstate commerce is controlled by the federal government so transporting cannabis across state lines is illegal, even if it is between two cannabis-legal states. it is also illegal to transport funds intended to further activities that violate federal law. Each state has its own micro-industry which means business operations should be carefully separated by state based on legal ramifications.

Your trademarks and intellectual property may be at risk.

Another implication cannabis being federally illegal, is that the United States Patent and Trademark Office (USPTO) will refuse application for cannabis-related products and services. It’s best to have a contingency plan for how to respond to federal legalization to protect your assets when cannabis is legalized.

Ready to Get Started? Call Now. (623) 377-4197

Louie A. Lujan

Government Relations Director & Senior Lobbyist