Week in Review: OR cannabis firms owe the tax man, Ohio nears MMJ sales & some MI cities ban rec businesses

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Oregon cannabis businesses fall behind on their tax obligations, Ohio inches closer to launching its tardy medical marijuana program, and some Michigan cities are prohibiting adult-use MJ companies.

Here’s a closer look at some notable developments in the marijuana industry this week.

Oregon tax crunch

Oregon marijuana businesses may owe the state up to $15.7 million in back taxes, but that shouldn’t necessarily be seen as a cannabis-specific problem, according to one analyst.

“In any industry where the stakeholders are faced with bleak situations and the ability to make a profit may not even exist, then you get things like people deferring their taxes, saying they’ll take care of it later,” said Ford Pearson, CEO of Portland-based Green Rush Advisory Group.

According to one report, the Oregon Department of Revenue says at least 10 businesses owe more than $600,000 each in back taxes and 176 total marijuana businesses still need to pay the agency some kind of tax money.

Pearson said the Oregon market has far too many licensed businesses, with more waiting in the wings, and the demand is not nearly strong enough to account for the supply.

“If you’re a guy selling marijuana flower in Oregon,” he added, “that’s about the hardest job in the world right now.”

Too many Oregon cannabis business owners are holding on even though the cards are stacked against them.

“We have a lot of people out there living in an alternate reality,” Pearson said. “They just haven’t faced the fact that they’re not making it.”

Ohio MMJ sales get closer

Despite an agonizingly slow regulatory process, Ohio’s medical marijuana market is poised to be a very good one for operators, a cannabis executive believes.

“It’s going to be a great market – great demographics, a great need,” predicted Darren Weiss, chief operating officer of Chicago-based Verano Holdings, a multistate cannabis operator with cultivation and dispensary affiliates in Ohio.

But, he added, “I really wish there was a more business-friendly approach.”

A state regulator said that some supply might be available by year-end, but larger amounts aren’t expected until the first quarter of 2019.

Ohio, which approved a medical marijuana program in 2016, missed a September target date for launching the program.

Weiss noted it’s understandable when regulators are concerned about being used or playing favorites, but he said Ohio regulators have taken an “extremely strict view” in holding licensees to their original plans, down to the detail, when “invariably there are going to be changes.”

Weiss said it’s been the most difficult market he’s experienced in that respect, but he did indicate the climate is beginning to change as regulators realize that MMJ operators “aren’t bad players.”

Mother Grows Best, a Verano cultivation affiliate, is being built out now in Canton, Ohio, Weiss added. He expects supply will be available by the second quarter of 2019.

According to Marijuana Business Factbook 2018 projections, Ohio’s MMJ market has the potential to generate more than $300 million in annual retail sales within several years of the program’s first sales.

Michigan real-estate squeeze?

The news that a few Michigan municipalities are already enacting bans on commercial marijuana businesses in the wake of last week’s election is nothing that entrepreneurs should worry about.

That’s the opinion of longtime Detroit cannabis attorney and activist Matt Abel, who was involved with this year’s successful campaign to legalize recreational marijuana in the state.

“There certainly will be more bans, but so far, we have 108 out of 1,773 municipalities that have allowed some type of medical marijuana facility,” Abel pointed out.

“Not all of them are allowing dispensaries, and we expect maybe not all of them will allow adult-use facilities, but we think most of them will.”

He also noted that other local governments had been waiting to jump into the medical marijuana regulatory game until after seeing the results of the recent vote because city and county officials didn’t want the headache of having to first pass MMJ rules and then revisit them with new regulations for adult use.

“So now is the time for them to get ahead of the curve and regulate the way that they want,” Abel said.

He predicted there will “absolutely” be plenty of real estate available for entrepreneurs looking to tap the state’s immense cannabis potential.

Michigan is already home to more than 297,000 registered MMJ patients, and it is the first state in the Midwest to legalize recreational use.

Allowing marijuana retail businesses – either recreational or medical – also is the only way municipalities will be able to bolster their tax revenues from the industry. Local governments won’t be able to impose their own taxes on, for instance, licensed growers or edibles makers.

“Municipalities are only going to get revenue for dispensaries which are licensed in their jurisdictions, so we think that’s a carrot they’ll want to bite,” Abel said.

Bart Schaneman can be reached at barts@mjbizdaily.com

Jeff Smith can be reached at jeffs@mjbizdaily.com

John Schroyer can be reached at johns@mjbizdaily.com