bite of about three minutes of that but we're going to first start off with daring to talking about some very key issues here in the state of washington on medical cannabis thing that's going on here very important that we start listening to each other in this community especially when we're realizing that we're looking at a very large worldwide market as you might want to know we're trying to work on creating means by which we create standards and ethics and things like that but now it also goes down into texas and finance and so the second part of this after week listening to a with david belzer and that's cana accounting here in washington state i hope you enjoyed this half hour with him he's a brilliant brilliant financial analyst and account so i hope he's also pioneering in this financial structuring in architecture i will be wilson if you want to send donations to help me out a dollar would help two bucks will help send it to all the life of a pay pal you can go there and wasn't money and help me out to be great i hope you can do that i do need to pay for tapes and discs and things like federal law still insisting upon keeping this plan on schedule one which it never should have been to begin with and and the states progressing and moving along in terms of not only medical cannabis but what they are calling recreational cannabis i prefer to call it the casual use because i truly believe that virtually all use of cannabis is medical it certainly even if that's not the intent of the person what it does is medical  as curative lead so one of the big issues and problems that we have in this industry right now and i'm sure they have the same issues in colorado the same issues and many of the states and that is that because of that being on schedule one and because of anti drug legislation that was stablished in the seventies laws that were never intended to be applied to the cannabis market are being applied to the cannabis market most notably to which is the thing that's kind of making everybody crazy in there with it because what that is it does not allow cannabis businesses to conduct business as a regular business it does not allow normal business expenses like staff expenses so if you have a good tender if you have a shop that the only thing you are doing is selling marijuana then you cannot deduct any of the normal business expenses that are affiliated with staff and that sort the shopkeepers if you will when once the colorado and washington implemented if the feds allow them to do that their version of so called legalization which of course is not legalization at all it merely  just remove some of the more minor penalties for dealing with cannabis once those rules are put into place once that is happening what we are going to find is a huge mess one of the worst she intends in the initiative itself is stated that part of the purpose and the goal is to lower the price of cannabis for people  you can't do that if you cannot deduct normal business expenses and point of fact it will probably triple the cost of cannabis so we have to really look at that there just we really heard a point where there really is no solution and there then the federal government saying ok we had a failed experiment and remove cannabis from the schedule at all that's when he really needs to happen right now so i would encourage anybody and everybody who is watching this program to pick up their phone to pick up their computer to write to call to all of their legislators their state representatives their state senators their federal representatives and their federal senators and tell to explain it to him because they don't know they're not educated they need to know that this is our medicine this is what keeps us alive this was what improves the quality of our lives and we need to have this accessible and affordable and we need to be conducted just like any other business you know stores that dispense cannabis whether it's medically or casually should not be taxed at any rate certainly not the ones that are medical should not be taxed at any rate that is in excess of what is japs to board tells which is one point eight percent of sales i have no problem with that whatsoever the very found that there are so many people who want to tax medical cannabis is also another big issue in my contention is the day that by april is taxed is the day that i will be willing to sit at the table to discuss tech scene my medicine which has saved my life via a grid has never saved anybody's life probably has put a few people's life  risk if you really want to look at the reality of the situation so actually there have been people who have died from taking by a group no one has ever died from taking cannabis so we really need to look at the financial structure we have to get the feds on board we have to be able to work with banks if you do not if the world does not want this to be a criminal enterprise then stop treating us like criminals and let us behave like honest regular business people which many of us are thank eighty six hundred are right choice one the center all organic always organic all about the patients truly patients helping patients which is what i think the legislature intended in the first place thank you you thank  last few months about the cannabis industry east meaning different forms of things and there's no easy to that there's a lot of work involved a lot of things nobody knows what's a discovery what's that mean i mean how do you know what you're supposed to do if you don't have any way of doing it because you don't know i think that's one way of looking at it or not seeing it because you have done it yet but anyway this is all the live show we've covered a lot of things i just got this last few weeks and this is july  two thousand and thirteen by the way we are here in seattle and we're taking advantage of a studio setting today because i'm trying to help educate all of us in the state the state has something on its agenda where they like it or not the voters voted in high five  to allison holcomb she's the author of it and then we have hillary breaking of the kana law group here in seattle and they've been doing quite a bit to try to get people in the industry that are creating commerce commercial businesses what kind of things is more than just one business you got to grow you're going to sell get a process get a package get a label you have transport it gets big he gets bigger and so we're covering the for things getting the people who have volunteered or selves to say put themselves into this which but got his websites in the background this could be interesting let me give you a rundown on what david's all about david working with several publishers here and while i'm sitting here talking why look at me let's look at david david good to see you yeah and this is david bill's or cannabis industry development accounting businesses that's something that is like we mentioned as you were on my last week's program david that let's say  no one understands what the means of accounting for business it's never been here before right yeah i mean it's all kind of a new thing so it's an exploratory think probably new forms of accounting new forms of management am i wrong  far as how or where do they approach that they don't know anything they're a blank slate this is never been done before it's all in your head specially getting licensing you know whatever and so in the same sense let's look at the standpoint that we can put together a project already counting project that keeps things in proper management as far as what this all about right yes so if we're going to start where do you start what do you tell a client well the first thing you want to know is how to structure their business and that is essential in the space in the tax aspects yeah and there's a lot of different advice going around about how cannabis or marijuana entrepreneur should structure his business and different lawyers are giving different advice but there there's several key issues that that go to that and some of that has to do with complying with federal tax law which is a special set of rules for the cannabis business and there's also the problem or the question of how to compensate the principles or that this might say the stakeholders or the shareholders and in the business those are the two things and then the management of the the operations is another seems like people are coming from one side of the business or the other they come out of they come out of the traditional business and they want to get into the marijuana  business using their traditional business knowledge but they don't know anything about marijuana and there's people from the marijuana background that have run their own small businesses and now want to become legitimate operators and there they don't have the knowledge for that so it's  half of each coming together to form that combined knowledge because suppose i am somebody who's already involved in the industry so by this way this is our audience we have an audience here today most everybody  s or some other agency those are very good questions and you're absolutely right about that now yeah i've been advised by several of my attorney my well that the criminal attorneys that i've talked to in town here are that you not make any reference to your prior illegal activities in your effort to go above ground that you start afresh and you start a new business and start legitimately from the beginning and operate that  way making no reference to your prior illegal activities that's then i would advise that as well it's been pointed out that that if you make reference to your prayer activities then you are incriminating ourself and you could run the risk of prosecution now suppose people are attracted to the industry for the sake of the new entrepreneur opportunities but they don't really know the industry have you found that most of what they need to know about business is already covered in they just need to know about this specific industry or do they have to leave it learn everything from the beginning i think a lot of us already covered in other industries although there's certainly some special knowledge that needs to be obtained about marijuana and the processing and and consumption of marijuana which would be unique from normal business knowledge you might have another business but a lot of the same things that occur in other business will occur in the marijuana business for instance you're going to have to keep track of your production costs and that is a special accounting function that is separate from your operational accounting and then the new rules under five o two require very strict accounting for waste and for loss when it's a transfer when it's harvest and they want to track from seedling to sale so all that is going to require specific identification in the in the accounting system but have you seen more interest in the medical side or in the recreational site again injury question because a lot of entrepreneurs are starting out wanting to get into the recreational business but they find that the risk the regulations are so burdensome that they think they'd like to start out as a medical business and then maybe transition over later into the commercial marijuana business so you go ahead so would you say are the differences tax ways between the medical side in the recreational side well tax wise well speaking in federal terms is no difference but in the state they have a very thorough system of taxing the commercial side at a twenty five percent per level excise tax so at every level the grower the processor and the retail seller have to pay a twenty five percent tax that is level so that's pretty heavy taxing for the commercial side now the thought behind that of the liquor board side is that well the price of the consumption the demand from from the general public will will support that and will support higher prices so that's the theory so do you do you suspect at all that that might actually just cause the black market to remain i mean there's a lot of people who can look it's fifty or seventy five percent tax and think the guy down the street from me doesn't charge me all that tax and it's just as good i guess he's kind of shooting themselves in the foot on that yes and that is a potentiality although again the liquor board is is saying well the the the public is going to get product that is tested measured they have assurance of quality assurance  of you know quality that they would not get in the black market so they're hoping that the public will turn to the legitimate markets of the black market for that reason as far as all the different sectors david at this point i mean the federal there's a special rule which affects the marijuana business which is code section two either natori it's code section which disallows all operating expenses for a business which is involved in the trafficking of controlled substances and marijuana still a controlled substance so marijuana business operators are not allowed to deduct normal operating expenses so that is a huge concern and numerous methods and devices are being created now by accountants and attorneys to circumvent that now have you seen any interest industrial hemp as opposed to recreational or medicinal cannabis yeah there's a revived interest in the the hand which is not marijuana meaning it doesn't have enough  is found in marijuana plant i think it's c b d which is used for treating other things so there's a been a revived interest in growing hamp for the purpose of c b d making c b d ok but how about the industrial side you know does the twenty five percent tax at every stage do you know that it applies to industrial because and actually i'm not sure if even a dutch industrial is addressed i know recreational it seems like you would encompass industrial but is that the case so they're not even interested in regulating any such product really interesting so in a same sense what we're looking at is a nobody even knows the road do they know they're still working on it you know the reports they're working on the rules and they had their second round of draft rules so they're still looking for comments they need volunteers in a sense because it i mean this is a this is a gigantic this is huge and it's right in your lap and in your tax professionals don't even have a defined way to know how to address it yet it's probably you're right true although they've been a couple of court cases which give us some guidance very little guidance and in california where medical marijuana is prolific they they've had a couple of cases down there one one pertains to  ok so let's say in efforts to circumvent to east somebody has more than one business and operates a second business out of the same place where they have their cannabis business with their expenses then be deductible from the other business oh yes or with the cannabis business interfere no it would be all the business expenses related to other business would be deductible there's a kind of a tendency now to create two companies when you have a cannabis or medical marijuana business well cannabis being the medical side where you have a nonprofit organization running the operations and then you have a l l c which owns the assets and that seems to be a common structuring now what kind of investors would you say are attracted to the business are we are we talking people interested in providing product or real estate developers or what you know the people i'm seeing that are interested in investing are people who have been successful  other businesses and have a lot of money and want to invest and they want to invest in an emerging industry and they see an opportunity here basically so what sort of financial upside d state of washington how big dollar wise do you suppose this industry is going to get well i don't have any way of answering that but how much business do you expect speck to get from the can know liquor board did talk about some of those things at a seminar i went to the other day and they were mentioning that they basically had no way of projecting those numbers either that they their initial estimate they've now multiplied the initial estimate by ten fold so as far as the growth of the growth of the market yeah and could you tell me do you suppose some of the legislation you're having to deal with the bureaucracy do you suppose you're laying groundwork for industrial hemp to come down the road is because everything hampers lumped in together you're not just talking medicine and medicine you're not talking recreational but also industrial which means you know being able to produce things used for fuel and things like this that's that's really where the economy's going to take off once you have freedom to use it battling so i expect it because it's a schedule and substance all the way around people are going to be looking at the at the case cases that come down based on the work that you're doing and decide some industrial decisions down the road based on that good point i mean again  the state is is not this is not intending to regulate industrial hemp and also they want to keep the industrial han't separate from the middest and all of the commercial growers because of the cross pollination potential the medical side and the recreational side of the same time or does everybody want to keep it separate well nobody's really doing the recreational yet because alas this is have been issued but a lot of people who do medical want to switch over to recreational  businesses and a lot of people who and a lot of people who start out thinking about getting into the recreational business have decided to go into the medical business first at least or rather than  you know correct racial because of the regulatory restrictions that the on the commercial how much bigger would you say the burden regulatory wise is on the commercial as opposed to the medical all versus nothing i mean there's virtually no regulation on the medical in the medical cannabis industry in the state that i can see really that's fascinating and all that and the there's forty six pages of proposed regulations for the commercial and marijuana business now it's my understanding that medicine in this state is not supposed to be taxed at all have you seen the test the case with medical marijuana the departed the position of the department of revenue is that a marijuana transaction is a taxable sale on a s e sales tax and david real quick david i was going to mention we do have about nine more minutes in this segment so i was going to mention what is it that f i'm going to start with contacting you accounting thing while that's part of it but it isn't just a county it's a business projection being so you're in a sense push you're working with a group of people in the field of candidates law the so yeah you think and also can business planning little on cannabis legislation yes so i mean the little town i'm going to call you up in this is what would you recommend where you start off that future quiet what do you do how do you do it like asking what they want to do know first what their aspirations are growing or processing or retail those are the three areas yeah and general they expressed an interest in one of those right and generally i'd say we probably ought to meet i  mean and go through some details you know right and basically the organization of the business and the assets that they're going to need how much cash they're going to need to operate working capital and that sort of thing and generally i like to do a you know a business plan which includes a twelve month month by month cash flow projection that way they can know what they're going to need and when in terms of cash and put also capital budgets they know how much assets they have to purchase going in and those two kind of go together because you can start out with fewer assets and as you get cash flow you can buy the assets later so that is very important otherwise you're going to be broke before you get started if i could let's say for example else it's growing from the growing to the processing to make the oils the extracts and then i'm going to have people maybe running my dispensary five people maybe and let's say i'm on my expenses in packaging processing everything like that but i i have not kept on their payroll taxes and it comes around accounting season i mean i'm sure this is a question that a lot of people are going to think about in the future because of all the different ways meaning new strategic ways to juggle this so my right to kind of rotate around to your own good yet you don't need new strategic ways there's plenty old strategic ways but regarding a question about payroll taxes if any if an operator falls behind they can payroll tax deposits they can negotiate a payment agreement with the i r s very simply by paying their current taxes and then working with the i r s on the back tax on a paint class that's very simple but they fall too far behind where they can't catch up in my advice to them is to close the business down and start up another one really really out and then that then the owner of the business will be responsible for those payroll taxes which should have been withheld from people's checks but they won't but there will be no liability for the employer share or for the penalties and interest so that would be a huge  savings bullets say for example i am a person that is looking at different types of corporate business structures and let's see i'm going to have a a growing business i'm going to have a transport business or delivery business and maybe even a medical service business because people that's going to evolve like the fury at trick centers are sure potentially six hundred thousand potential clients in the patients in the state that's about i don't think i'm underestimating and so there's more involved they may have five or six businesses not just one am i wrong i mean well that's good you know you could you could that be like where would you start they are well you know you'd have to organize them separately you know each business would be organized separately and now that liquor board has made there's  saying you can't be a on the commercial side you can't be a grower or a processor and a retailer you can be a grower and a processor right but not a retailer so in a sense what we're looking at is you're not in violation if you own different companies to do each one but you can't do it under the same company that's the way i understand it a little see if i understand it correctly what you're saying is that you can't be completely vertically integrated you can't go from see to retail you're correct and it looks to me like the reason for that is to make sure that state gets at least one twenty five percent cut because if i understand it correctly if you do have several businesses of your own involved you'd have to charge yourself a twenty five percent tax every time you did something new with the product  correct well yes but i think they're saying that their motives are basically to protect the consumers i don't quite understand that i don't quite understand  think you know i think what's going to happen is the commercial side is going to go to the bigger boys in the in the medical side will remain in the hands of the mom and pop entrepreneurs that's the way i see it so in a sense you're looking at possibly kind of commercial and mom and pop it's yeah different worlds yes it's quite the but that's really quite the challenge isn't it the other quite a bit different they're entirely different and they really have no relation to each other at all yeah yeah interesting phenomena do you think that they're going to have to start training this in the school the business schools here locally i mean it's a whole new phenomena i mentioned two years three years ago that legal media journalism is going to cover different aspects of the way the law will be practiced and also in the way it's done in the court system a whole nother thing going on i mean i'm wrong i mean it sounds right to me yeah so you're in the middle of it too it's all townies do i think i'm on the edge here yeah you sure are and we've got three minutes left and we're going to put all your contact information up here which is right here to a six two two four three five four  starting cannabis business in washington contact david bill's or your david i guess i got your e mail up there and there's more information david you in this last few minutes what kind of a thing do you want to mention to the public to your future clients was all at one hold of mike understood i produced as i say i believe if you're going to sell it to a processor there would be a tax but if you're going to sell it to another grower i believe there would be no tax in that case then just going by w liquor board said at the last seminar i went to that's great because i would like to practice this thing called distributed agriculture where i'm just handing out some clothes to people who can't provide for themselves any other way and i would hate for there to be a twenty five percent tax on something like that  thank you thank you very much fred greatly honored to have you here today my pleasure this is the information below people want to get ahold of david you're based out of seattle yes and you know i've got this information here which is your phone number and your e mail you you know and i really appreciate this i hope to get on maybe we can do some more t v series maybe work with the weekly on doing a like a regular broadcast in this area they've got you think it's needed i really do think it's be delightful yeah i agree i greatly honored david thank you very much that this is the all the live show and i hope we're helping you david do you think we're helping and i'm very pleased thank you i mean are you i mean we're all here just simply because we're trying to help right i mean yes i help think this is kind of  were busy of that so the way that we're getting we're building a database so we're having people we're doing a huge drawing where we just ask people to write down their contact information and we do the drawing and they get highlighted the first people so whenever we gather together in any community gatherings and on our students are teaching them anything just the first thing that we do you make sure that you to understand the land