Cannabis Law FAQs

Common examples of cannabis businesses include cultivators and harvesters of marijuana plants, processors of raw cannabis materials, and retail facilities like dispensaries that sell products to consumers. Less mainstream types of businesses include companies that make products used to consume marijuana, delivery services that transport marijuana products to consumers, and testing facilities. Any of these businesses may focus on patients seeking medical marijuana or on general audiences seeking recreational marijuana.

No, someone starting a cannabis business generally must meet residency requirements under state law. They also usually must not have certain criminal convictions on their record, such as felony drug offenses and violent crimes. Business owners may need to pursue licenses from both state and local agencies. Sometimes local rules are stricter than state rules.

The cannabis industry remains illegal under federal law, and banks must comply with federal regulations that make it challenging to lend to an illegal business. A bank may need to file a suspicious activity report for each transaction involving a marijuana business, for example, and they may not be insured by the Federal Deposit Insurance Corporation if they issue loans to these businesses. Sometimes a cannabis business tries to get bank services by concealing its nature, but usually a bank will discover this deception eventually.

Yes, federal income tax applies to income from marijuana businesses. A taxpayer who fails to report income from this type of business may face federal tax evasion charges. This is true even though federal tax credits and tax deductions are not available for these businesses, since they are prohibited by federal law.

You may be able to buy seeds for your cannabis business online through a seed bank, as long as this is legal under state law. However, you face a risk of having the seeds confiscated during transit. A cannabis business owner may prefer to buy seeds from a local company or dispensary to avoid potential confiscation and a small chance of federal criminal charges.

Probably not. Most dispensaries and other cannabis businesses impose rules regarding employee drug use and drug testing that resemble rules at other businesses. Some businesses in this industry may monitor employee drug use even more carefully than the average business, since they are especially concerned about preserving a clean image.

No, a cannabis business cannot ignore federal laws protecting employees from discrimination. Laws such as Title VII of the Civil Rights Act apply to these workplaces, even though the cannabis industry is illegal under federal law. The Equal Employment Opportunity Commission even has pursued litigation to assert the rights of employees at marijuana businesses. However, state and local laws often provide broader protections for employees.

Under a labor peace agreement, a cannabis business agrees to refrain from interfering with the efforts of a union to organize its employees. Meanwhile, the union agrees to refrain from adopting certain tactics that would interfere with the operations of the business, such as strikes and boycotts. A handful of states have started to require these agreements or similar policies in exchange for granting licenses to cannabis businesses, while others incentivize businesses to adopt them.

A marijuana exchange-traded fund can hold the stocks of many companies in the cannabis industry. Investors then can buy shares in the ETF rather than a specific company. This can be an attractive alternative for an investor who is interested in entering the cannabis industry but does not want to commit to a single target.

Not necessarily. Not every state that allows the sale of marijuana allows delivery services. In states that allow delivery services, a business owner may need to get a separate delivery permit in addition to their general business license. Local laws may impose restrictions as well. During the COVID-19 pandemic, more states began to allow cannabis delivery services to form or expand. As the pandemic winds down, though, some of these rules may revert to earlier norms.