Delinquent payments are causing a cascade of problems for small and large marijuana operators nationwide, according to a new report by Oregon-based cannabis data and research company Whitney Economics.
Preliminary results from the survey of operators and ancillary businesses revealed:
- 43% of respondents said delinquent accounts receivables are impacting operators’ ability to service debt.
- 32% of respondents believe delinquent accounts receivables are impacting operators’ ability to pay state or federal taxes.
- 59% of respondents reported that delinquent payments are having a greater impact on their business than Section 280E, the federal tax policy that prohibits marijuana operators from taking traditional business deductions because of the plant’s Schedule 1 status under the Controlled Substances Act.
Some respondents indicated accounts receivable delinquencies totaled more than two months of revenue, eclipsing millions of dollars in some cases.
Cannabis brands, distributors and manufacturers have been dealing with unpaid invoices for years, but the problems really ramped in mid-2022 as industry stocks tumbled and capital dried up, sources have told MJBizDaily.
The issue has led industry operators and lawmakers to seek potential solutions.
In May, MJBizDaily reported that a group of California distributors and brands representing more than half the state’s wholesale B2B cannabis market hired a credit association to rate retailers in the hopes of reducing hundreds of thousands of dollars in unpaid invoices – and reining in repeat offenders.
In California, the world’s largest regulated market, social equity licensees and brands, including Black- and Latino-owned businesses, have been particularly hit hard since most lack capital reserves and resources.
California Assembly Member Philip Ting earlier this year sponsored Assembly Bill 766, which proposed stiff penalties against operators skirting credit agreements.
However, the bill was not included among several major changes lawmakers approved to the state’s cannabis regulatory system.
In New York, regulators earlier this year proposed rules requiring operators to pay for purchases on credit within 90 days.
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