If you own a business in the cannabis industry, you’re already aware of the industry's unique set of complications. The regulations are not only complex, but they are also continuously evolving.
Among the most challenging aspects is payroll, and with the cannabis industry continuing to grow, now is the time to get ahead of these payroll difficulties.
According to Leafly's annual Cannabis Report, in 2020, legal cannabis supported over 243,000 jobs in the U.S. Calls for legalization continue to rise as more states recognize the economic impacts of legal marijuana. With all this, the United States cannabis market is predicted to grow to 30 billion by 2025.
Below is an insight into cannabis payroll, including its evolution, the current industry challenges and how to counter them, and our recommended tools to simplify payroll.
Although cannabis is legal at some local levels, several states have not yet legalized the drug for medical or recreational use, nor has it been legalized federally. The variation in these legal codes creates hitches for cannabis payroll tax compliance.
The regulatory uncertainties involved have profound impacts on essential financial services for businesses. Most cannabis business owners still struggle to open federal checking accounts, which makes typical business operations such as bookkeeping and payroll difficult.
Although there are no rules restricting banks from doing business with cannabis businesses, federal law requires banks to monitor the retailers for prohibited activities closely. The financial institutions offering banking services to cannabis business owners have to file a known Suspicious Activity Report (SAR).
This report protects the banks from prosecution if one of their cannabis clients is involved in criminal activity. However, banks can be imposed with hefty fines if they fail to report suspicious transactions correctly or misidentify them.
The potential fines associated with inaccurate SARs can be higher than the profits offered by some cannabis companies. Due to this, most institutions rarely bank cannabis-related businesses.
Most business transactions and services require a bank account to be completed. This means that business owners who do not possess a bank account struggle to offer some services to their clients. Lack of a bank account hinders payroll service providers from completing payroll processing and making direct deposits.
Due to this, most business owners are forced to use their traditional payroll processing system to calculate wages and taxes. This method is prone to substantial marginal errors and causes problems during payroll tax compliance as most payments are made in cash.
As discussed above, the lack of banking services significantly hinders accurate cannabis payroll tax reporting. Without banking services, cannabis business owners encounter different problems like employee misclassification, cannabis payroll tax compliance, and payroll processing.
For cannabis payroll tax compliance, the cannabis firms are forced to pay their taxes, including making IRS returns, in cash. With the cannabis industry being a multi-million dollar industry, the IRS is forced to process thousands of cash payments. Through this, the commission is more likely to struggle to file the cannabis payments as they might not have enough resources to process the cash payments.
Payroll is one of the most complex tasks for HR in the cannabis industry. The industry has multiple ever-changing regulations that HR is required to comply with. HR must develop a good relationship with their workforce to achieve their set goals. Below are some of the steps to help you achieve your payroll goals.
The cannabis industry has supported multiple permanent and temporary employees. Like any other industry, cannabis companies employ new talents while some workers are regularly offloaded. You need to be updated with accurate employee data during these transitions.
A payroll calendar helps you remain organized and supports scheduled payroll activities. It helps you set a deadline for expenses reports and pay stubs. Sticking to it allows the company and the employees to have a good relationship.
Avoid using traditional methods of payroll data entry, which include spreadsheets and manual data collection and entry. You can quickly make errors while using these methods, and they are also time-consuming. Using modern software enables you to execute your data quickly and accurately. This, in the end, gives you clear and straightforward payroll data.
Having the right tool enables you to deliver your duties on time and make accurate payments to your workforce. At Teamployer, you can benefit from a variety of payroll tools, including:
With the number of payroll challenges cannabis business owners face, you need to work with an HRO that offers cannabis-specific HR payroll software. At Teamployer, we provide you with a straightforward and comprehensive solution to your HR and payroll challenges. Contact us today to enjoy the benefits of efficient cannabis payroll processing.