Originally Posted by bluesteve
Something you guys need to think about. The IRS IS NOT allowing any tax deductions for expenses incurred in the production of medical Cannabis, but they do expect to be paid tax on your income from doing so, which means that if it cost you $10,000.00 to produce a commercial crop, & then you sold it for $20,000.00, you would have to pay income tax on all $20,000.00 that you took in, where in any other business, you'd only be taxed on $10,000.00 of the $20,000.00 you took in. In other words, you're going to be taxed on everything, not just your actual profit! This can make making money on this venture VERY difficult until things change in DC, & with the IRS. And it will be a far different reaction from DC, I believe, if Ca passes their Prop 19 to legalize for recreational use. Don't get too excited just yet!
In California, I can sell to my local dispensary, but by CA law, I'm only allowed to charge as much as it cost me to produce the crop. No profit is allowed--by law. But we all know that they're not able to build the $20,000,000.00 grow facility in Oakland CA, that the Oakland city council has approved, & for which property has been acquired, because they weren't making a profit all these years. That $20,000,000.00 didn't magically appear out of no where!
I don't know how they hide it, but they do. Don't know what other states are allowing as to growing for dispensaries, but in CA, the guys who started all this seem to be the only ones who can really operate at any level they wish to. In a recent conversation with someone who runs a dispensary in CA, regarding the prop 19 legalization measure on the ballot out here, he told me that they (the guys in Oakland & their politician friends in Sacramento) already have decided who will be allowed to run coffee shops, stores to sell over the counter, & who will be allowed to grow commercially for the new recreational industry, and this guy is in a position to know. So, if you live in CA, don't get your hopes up, as they will probably be dashed. I have 108 acres and would like to be in this business, but I'm running into problems already! Big money is already in control of our Cannabis industry. Expect to see prices rise to as much as $800.00 @ ounce, or more, for the best quality, once the taxes and regulatory fees kick in. We may finally be getting what we've been wishing for since the 60s, but not in the way we always thought we would. Personally, I always thought that if it ever became legal it would finally be reasonably priced, believing that the only reason it wasn't was because of the huge risk all those who made it available to you, took. Guess I was dreaming, eh?
But, I'm not giving up on this, and if it turns out that I'm not allowed to grow commercially in CA, if the new law passes, then I may well challenge that new law in court on the basis of restraint of trade. Cannabis is a plant, and I've been a commercial farmer for 27 years. As such, I should be able to grow any crop that is legal.
And lastly, this new law says that you'll be able to grow in an area 5 feet square. It also says that you're only allowed to posses one ounce of dried processed cannabis. How many of you have ever grown a plant that produced only a single ounce. Not that it's impossible for this to happen, but it is usually by a mistake, and as soon as you were to harvest you plant from that 5 x 5 area, you'd be in violation of the legal limit for possession! And the one ounce limit means no more buying quarter pounds to save money. They want you to have to come to them for that ounce and pay them that big ounce price!
