Potentially Huge Market for Nonprofits: “One Toke Over the Line” to Feds

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March 6, 2013; Source: Times Call

Think fast: the answer is marijuana and prostitution. What’s the question?

The question is, “What are the two activities that are legal at a state level but prohibited under federal law? For prostitution, we refer only to the state of Nevada, but when it comes to marijuana, 15 states that have either legalized or decriminalized marijuana are now dealing with this conundrum.

The two states that have outright legalized marijuana for recreational use are Colorado and Washington. These two states are now faced with the task of creating a regulatory framework for an industry that has largely operated underground. Nonprofits will likely get a corner on the market because the status is required in order to be involved in the industry – an artifact of the weird morality surrounding the whole endeavor.

But the market could be very, very big. Bloomberg estimates that if marijuana were completely legal nationwide, the market would likely be in the neighborhood of $35 billion to $45 billion but other estimates go as high as $120 billion. Bloomberg reports, “Tax collections from such sales could reach $9 billion to as much as $20 billion, according to Brad Barker, a Bloomberg Industries analyst, who cited projections by the Cato Institute, a nonprofit research group, and the Congressional Research Service in a March 1 report.”

We are embarrassed to admit that we were not paying attention to the potential boon this might be for our economy. Colorado’s legislature is now considering how it might impose a 15 percent tax on wholesale marijuana sales and in Washington, producers, processors and retailers will be required to pay a 25 percent sales tax to the state liquor board. However, there are some odd problems facing those who would seek to establish themselves in this new, confusing, and still risky realm of entrepreneurism.

There is the obvious risk of being raided by the feds, but there are other issues, too. Bloomberg notes that U.S. bank are not allowed to provide services, including business loans, to the industry. Robert Rowe, senior counsel at the American Bankers Association, a Washington, D.C.-based trade group, said many bankers “would welcome the opportunity to offer the services but they can’t because of the federal government…They’re afraid of what would happen if they tried to do something.”

But for now, some in Seattle are seeing the industry as a boon that will make the city a bigger tourist destination. Shy Sadis, who now runs a nonprofit dispensing medical marijuana in Seattle, plans to convert to a for-profit once able to sell marijuana for recreational purposes. “People are going to be coming here and when they come here they’re going to want to get off the plane and experience cannabis…It’s such a great feeling to be one of the pioneers of this industry and seeing where it’s going to go in the future.”

Sadis’s comment raises a fundamental question for us. Nonprofits were in on the ground floor, so to speak, in the legalization of marijuana for medical use. Now that some states have legalized marijuana for recreational use, is there a legitimate role for nonprofits to play? Or does the potential change to a much larger, more profitable and consumer-focused industry come with the implication that nonprofits might need to step aside in many cases? –Ruth McCambridge

  • Daniel

    If you’re talking about non-profit dispensaries and medical card clinics, I would argue there has been very little “non-profit” or charitable in the actual operation of most of these operations. I think the fact that most of these operations are literally running full speed to become for-profit simply shows their true colors. The largest segment of these operations–non-profit or otherwise–has mostly and centrally been consumed with business activity. Hence why the IRS has been regularly revoking their exemptions. And, normally, they seem to have a lot of trouble calculating the taxes they owe…..which begs the question: I wonder how much in tax revenue CO and WA think they’re going to actually collect….? I hope their budgets included funding for armies of auditors and investigators…. I venture to guess the sales tax revenue hoax is something very similar to the hoax pitched to voters in Medical Marijuana states. That is: that the laws were meant to serve the severally or terminally ill, but instead in practice just became an obvious and blatant pretext for legalization.

  • Jimmy Bobby

    ^^^^ This guy is dumber than a box of hair

  • Perry

    You are right… How dare people attempt to actually make money on an investment haha. That’s not what opening a small business in America is all about right? Considering all pharmaceutical companies operate as non-profits? We should take all this risk so that the operators of these businesses can make $0 even though these are not privileges to be scoffed at. No! They are rights that were voted on and must be protected.As for the “blatant and obvious pretext for legalization”. That’s how it works. You have to break the public into accepting non-dangerous, non-addictive medicine slowly because they have been generationally brainwashed by those deep thinkers in Washington to believe that cannabis is this awful thing. Pen caps, peanuts, and aspirin kill hundreds, maybe even thousands of people each year (mostly babies choking on the pen caps) from allergic reactions and taking aspirin with the wrong medicine. Cannabis? not a single fatality… Yet cannabis is still publicly demonized. Borderline hilarious if people weren’t being murdered by the local police departments around the country in this war on nothing.. Enough about that. Yes. It was set up for terminally ill patients. But I’ll ask you this.. In the story of sodom in the bible god asks his servant to find 10 righteous men in the city and it would be spared from destruction. In this way I ask if 100 people walk into a dispensary and seek protection under the law, and only 1 person who truly needs it and gets relief from cannabis also uses this same store. Would you spare that “city from destruction.” As long as all of the “patients” have all of the correct paperwork and have gone through the necessary steps?
    Now on to your actual point of tax revenue. There is no doubt that the potential marijuana market is beyond huge! The revenue that will follow is obvious. States can tax it as much as theu like in theory,, but if they tax too much you will just create another black market like ae have now. Armies of investigators and auditors? well paying jobs I say. Just like the mmj industry itself gives well paying jobs to mostly toung people who mewd them. And what fun to work at a weed store! Jobs create jobs 🙂 basically you can’t stop this. Nobody can no matter what at this point. There is too much momentum on our side now. The tide is turning daily. This truly is a war of good vs evil. And we are winning battles more often than losing them at this point.