When getting into cannabis cultivation, many people don’t think about having to choose quality over quantity or vice versa. What it usually boils down to is not a matter of choice, but of economy of scale aka money stuff. Producing quality cannabis is about removing your ego and aptly identifying the needs of your plants. Producing quantity is about finding the right balance between healthy plants and your overhead costs.

Quality cannabis cultivation techniques

Technique is really what it comes down to when you opt for quality over quantity. So which techniques really make a difference and why? You won’t find much flexibility in environment once you achieve your target climate. There’s no need to improve on optimal. Your nutrient feed and the ecosystem you create in your soil are what will make all the difference.

The best quality cannabis cultivation comes from plants that have achieved maximum nutrient uptake. Nutrient bio-availability is the key to rich, full flavored and oh so savory marijuana. Methods of organic cultivation have shown produce cannabis with double the nutrient absorption of traditional salt based nutrients.

Organic cannabis cultivation

Organic and veganic cannabis cultivation techniques foster the growth of beneficial bacteria and microbes, which in turn convert the nutrients in the soil into a form that is more readily absorbed by the root system. It is this relationship between these beneficial microbes and bacteria, and your plants, that is ultimately responsible for the best cannabis out there.

Organic cannabis cultivation depends on nutrients that utilize animal and plant matter instead of elemental salts. There is a distinct difference in quality attributable to the symbiotic relationship formed between the roots and the microbes. Veganic cultivation takes this concept a step further and by using simply a compost tea, rich with beneficial microbes, increases nutrient uptake to nearly 100%. However, implementing these techniques in a large scale commercial grow simply doesn’t fit the bottom line. Also, due to a multitude of sources for contamination, most cannabis that is claimed to be “organic” actually has traces of inorganic contaminants.

Benefits of home growing

For the home grower it fundamentally comes down to basic understanding of plant biology and how to ensure the variety of needs are met. The budget for the home grower is negligible when it comes to the method of cultivation. Their methods are usually picked by familiarity or a spirit of exploration, pushing them to try new and innovative techniques. The home grower isn’t as restrained by investors looking to maximize profit, thus has more freedom in their application of technique. Additionally, when you’re growing on a smaller scale, your overhead is going to be significantly less/more contained than commercial growers. This means that home growing could potentially be extremely profitable (selling legally or illegally), with low overhead and high revenues.

Benefits of commercial growing

You can produce quality cannabis in a large scale commercial grow using hydroponics and nutrient salt solutions. There is no doubt about that. While it is totally subjective, many people believe that commercial cannabis cultivation frequently does not achieve the fullness of flavor, aroma, and essence of a boutique strain grown with the right techniques due to the homogenization that occurs in every big grow. When you have ten strains per room and ten rooms to water in a day, no commercial grow has the time, money and staffing to cater to the needs of every plant. The result is a fairly standardized, abundant cannabis product, that doesn’t differ much from dispensary to dispensary, and is for the most part, accepted by the vast majority of cannabis consumers in Colorado. Obviously, one of the main benefits of commercial growing is the sheer quantity of product that you are capable of producing. However, the overhead for the average commercial grow is well over $1 million.

Bottom line (literally and metaphorically)

Bottom line, the difference between quality and quantity of cannabis cultivation comes down to a matter of economy of scale. Many people aspire to have a huge commercial grow producing tons of dank ass cannabis. However, you can avoid huge overhead costs (which matters if you’re just starting up) and produce quality cannabis at home. No matter what route you choose, you can have both quantity and quality, if you apply the proper techniques which includes removing your ego from the process.

The Colorado cannabis industry compliance regulatory landscape has changed dramatically over the last decade here in Colorado. Long gone are the backpack days, when anyone with a closet and a green thumb could cash in on the fledgling market.

Pre cannabis industry compliance

Retail cannabis sales for recreational use threw a whole new set of rules and regulations into the mix. For anyone who has worked in the industry and tried to maintain within marijuana grow compliance, it sometimes feels like the rules are written arbitrarily by people who have never worked in cannabis cultivation. Running a profitable grow and maintaining compliance along the way in an ever-shifting legal landscape is as challenging as it sounds.

Once upon a time, talented home growers could walk into a dispensary with absolute fire, and flip it on the spot for upwards of $4500 per pound. There were no safety checks, tests for pesticides, microbes or anything else for that matter. They were the days aptly labeled the wild west era of the Colorado cannabis industry. Those pre cannabis industry compliance days didn’t last long, and it was a miracle they happened at all.  New states hopping on the legalization bandwagon have bypassed that phase entirely and seemingly learned from Colorado’s mistakes.

The evolution of cannabis industry compliance

By late 2010, Colorado mandated that medical dispensaries grow at least 70 percent of the cannabis they sell. This forced dispensaries to hire growers of their own. Along with that came a slew of new cannabis grow rules, regulations and the modern era of compliance was born. Nowadays, every last detail of a grower’s day is mapped out. Each plant is tagged, numbered and monitored by the state. Every bag of waste is counted, weighed and the contents are shredded beyond recognition before disposal. Every step of the way, the eye of the Marijuana Enforcement Division documents everything.

There are a few cannabis industry compliance areas which all operations struggle with, and it isn’t really their fault. The vast amount of regulation hoisted upon this burgeoning industry is a lot, even for seasoned professionals to swallow. The biggest shortcomings of dispensaries are in the areas of physical inspection, security, licensing,  inventory and financial issues. Physical inspections are akin to the health inspector looking for cat fur at the neighborhood Chinese restaurant. Anyone who has worked in a service industry knows that inspectors always find something.

Security & inventory compliance

Security is a bane of every cannabis business owner. Adhering to the Marijuana Enforcement Division’s strict security regulations, which include specific numbers of cameras per facility in very specific locations, is no easy feat. Security compliance mostly revolves around documentation of who went where and when, and keeping logs on specific security activities.

When it comes to inventory, the Marijuana Enforcement Division has done everything they can to eliminate the possibility of a black market forming right out the back door of legal grow operations. Inventory compliance is one of the biggest concerns for dispensary and grow owners. Compliance errors involving innocent mistakes, such as placing a recreational plant in a medical room could result in an entire crop being destroyed. The government wants to know where all of the weed is all of the time, and has implemented a system to achieve just that.

Pesticide compliance

Lately, the trends in grow compliance have mostly fallen to the regulation of pesticides. Understanding pesticides is a complex topic, so to make it easy, the state issued a list of approved organic products. Here we are years after the list was finalized, yet business who are established and should know better, are continually getting busted using banned pesticides. This example alone shows the need for increased regulation and the need for every grower and dispensary owner to want to remain in compliance. The last thing we want is to fall victim to is a company that wants to take shortcuts with our health.

For more information on compliance within the Colorado cannabis industry, make sure to listen to The Real Dirt with Chip Baker episode featuring Matt Bickel of Bickel Consulting.

What do you think about cannabis industry regulation? Let us know on social media.

One of the benefits of owning a business in the U.S. is the leeway one has in writing off business related expenses to reduce your overall tax burden. Unfortunately, when it comes to the cannabis industry, business owners are not afforded the same luxury.

What is Section 280E?

Under section 280E of the U.S. tax code, tax credits are not available for incomes derived from substances listed as either Schedule 1 and Schedule 2. In other words, cannabis industry entrepreneurs are drug dealers in the eyes of the feds and therefore get no breaks.

Where did Section 280E come from?

Section 280E came about in September of 1982, after a cocaine dealer was busted, but maintained he had the right to write-off non-drug related expenses as part of his business operations. Nice try, but the court disagreed and shortly after, the IRS adopted 280E. Fast forward thirty plus years and the situation has changed. The overwhelming consensus among Americans is that marijuana should be legal. A small faction of individuals in various parts of the government whose careers are dependent on marijuana prohibition are doing everything they can to delay the inevitable, including the IRS.

How 280E affects the cannabis industry

The IRS has not made any progress in softening the burden for cannabis entrepreneurs as they continue to do everything in their power to make operating a cannabis business a difficult as possible. While most entrepreneurs freely write-off just about everything, cannabis business owners are restricted to a handful of deductions including labor and limited costs surrounding production. The failure to progress with the attitudes of the populace and create new regulation for cannabis entrepreneurs demonstrates the resistance of the old guard.

The cannabis industry is raking in cash hand over fist. While the IRS can do nothing to stop the industry from growing, they can do everything in their power to maximize the amount of money they extract from it before more comprehensive, cannabis industry specific tax law can be written. Efforts have been made to reign in the IRS in as far as cannabis goes. In 2013, legislation was introduced that was meant to remove cannabis business from federal tax regulation while new cannabis specific law could be written. While legislation like this seems to go nowhere, the reality that cannabis must be dealt with under its own tax parameters is becoming harder to ignore.

Section 280E successes in the cannabis industry

There have been incremental victories won, including the 2007 CHAMP decision. CHAMP, a medical dispensary in California was taken to court over its tax bill. The lawyers for CHAMP argued that despite the strict guidelines of section 280E, cannabis businesses still had a right to deduct the costs of operating a business that were not related to the trafficking of controlled substances. Ultimately the ruling allowed cannabis entrepreneurs who ran multiple businesses under one roof to deduct some of the operating costs of both companies. As example, CHAMP ran a dispensary which sold marijuana, but also ran a consulting and patient referral business.

The CHAMP ruling allowed many cannabis businesses to split their operations into multiple companies as a way to get around many of the 280E regulations and still remain in legal compliance. The intent of section 280E was fundamentally to prevent cocaine dealers from writing off mansions and yachts, but the emergence of industries that overlap with the previous law just doesn’t square.

Tax code 280E reform and progress

The failure to implement new tax code for the purpose of distinguishing between legal cannabis businesses and illicit drug dealers has done nothing but force legitimate businesses to resort to makeshift fixes, like the CHAMP ruling and other loopholes they can find. Much like prohibition created a black market, inappropriate tax law does nothing but force cannabis businesses to find new and creative ways to reduce their tax burden. As cannabis acceptance continues to grow, it would seem that these problems in the tax code are transitional. Let’s hope they are.

What do you think about Section 280E reform? Let us know on social media.