Zachary Gordon, chair of the NYSSCPA’s Cannabis Industry Committee, would like you to discard the tired jokes and stereotypes. With the majority of U.S. states having at least some degree of legalization, ranging from medical to recreational, cannabis is a rapidly maturing industry that presents lucrative opportunities for business professionals of all stripes. New York state, which launched its medical cannabis program in 2016, may soon adopt a recreational cannabis program, now that Gov. Andrew M. Cuomo has come out in favor of it. As reported in Politico, he said, “We now have a group that is drafting legislation and it’s something the Legislature will take up next year. … It will be a controversial topic, but it’s something that the Legislature will act on.” The prospect of a recreational cannabis program in New York is one of the reasons why Gordon’s committee is organizing a Cannabis Conference on Dec. 11, which will explore these opportunities in depth.

“If you’re an accountant, a finance professional, an investor or someone who has an interest in starting something new, this is a brand-new industry, and there are so many opportunities,” Gordon said. “Specifically [regarding] finance, compliance and operations, … it’s a great opportunity.”

Gordon, who runs a cannabis tech incubator, said that despite the relative novelty of the industry in New York compared to other states, the sector has become a highly lucrative industry. New York City Comptroller Scott M. Stringer has estimated a potential $3 billion industry for New York state, and $1 billion for New York City alone, leading to $772 million per year in combined tax revenue for the city and state. The CPA profession, Gordon said, cannot afford to ignore this burgeoning industry, given the wealth of opportunities to provide all kinds of business services, particularly tax planning, which the industry is greatly in need of, considering that cannabis remains illegal, by federal law.

At the same time, however, he wants CPAs to enter this field with both eyes open. While legal cannabis can be a lucrative opportunity for CPAs, the industry has many challenges, the biggest of which, he said, is the perceptions that come with it. This has led some of the more risk-averse CPAs to avoid the industry altogether, which he thinks is a big mistake.

“A lot of people still think it’s this underground criminal activity, but it’s really not,” he said.

Gordon said that the conference will seek to address questions and concerns that people have about getting involved in the industry with a panel discussion, “Should I Take This Cannabis Client?” which explores the legal and financial ramifications of working with cannabis industry clients.

“That’s a question you’ve got to ask yourself, whether you’re a sole practitioner, small firm, medium-sized firm or [one of] the Big Four. There’s no easy way to answer that. … You could have more conservative clients who want no part of any professional dealing with this industry at all, so you have to weigh the costs of that, potentially. There’s no perfect answer. It’s getting all the decision makers together and figuring it out,” he said.

In addition, there are numerous regulatory hurdles that can try even a seasoned professional. For instance, because cannabis remains illegal on the federal level, paying taxes can be a challenge: Section 280E of the Internal Revenue Code bars any deductions or credits for any businesses trafficking in the sale of illegal drugs. In addition, state-to-state transactions are still a felony. Even within states, there remain a number of statutory hurdles. For instance, Gordon explained that the product needs to be properly sourced, and there are a number of definitions for what that means. Furthermore, because many banks won’t do business with marijuana companies, the industry remains primarily cash-based. The NYSSCPA hosted a Marijuana Symposium in December 2016, which addressed many of these hurdles, but the prospect of a recreational program raises additional regulatory issues.

The industry is also challenged by a lack of overall business experience on the part of clients. Clients, Gordon said, can sometimes have no concept of even creating a legal entity, and even running something as simple as QuickBooks can be foreign to them. This lack of knowledge is an opportunity for accountants and financial professionals.

With the prospect of a recreational program on the horizon, New York state has been holding a series of listening sessions throughout the state, during which residents can express their concerns about setting up such a program. At the listening session held in Manhattan on Sept. 20, New York Assembly Member Richard N. Gottfried (D) expressed his desire that the industry not be dominated by just a few large corporations, which, he said will require carefully drafted legislation. A representative from Comptroller Stringer’s office observed that New Yorkers of color have suffered the most from the consequences of marijuana arrests, and she expressed the comptroller’s hope that the legislation would afford affected communities better access to the wealth that’s generated by the industry.

Other speakers echoed those concerns and advocated for additional provisions, such as those that would establish safe havens for the consumption of cannabis, given the city’s anti-smoking laws; ensure that children who use cannabis medically would still have access after recreational use is adopted; and initiate budtender training programs to ensure that budtenders—cannabis sales representatives—offer consumers accurate information and the highest-quality product.

Jon Malave, the founder, owner and CEO of QAcanna, a quality assurance firm that works with the cannabis industry, and one of the scheduled speakers at the conference, said that many clients aren’t fully aware of what goes into assuring a quality product and why they would need the services of a firm like his.

“It’s a no-brainer in [other] industries … but not for people in that industry. We know we want quality stuff, but we don’t understand what goes into establishing the manufacture of really high-quality products. There are a lot of controls that have to be in place, a lot of systems, a lot of knowledge base that needs to be applied, because there’s a wide breadth of different activities, from validations to statistical analysis to establishing known performance indicators. All of these are under quality, and it’s a complex task,” he said.

He added that all of this is not done solely for the consumer: Given that states have quality standards for cannabis products involving minimum levels of the ingredients THC (tetrahydrocannabinol) or CBD (cannabidiol), quality assurance holds an important regulatory function as well. He noted, too, that companies that do not meet minimum standards sometimes wind up on the black market, which can draw attention not just from business regulators but from the Drug Enforcement Administration, as well.

It is Malave’s hope that, at the upcoming conference, he can impress upon people the importance of quality control and assurance. This industry, he said, is already very regulated and will likely become more regulated as time goes on. Rather than find this daunting, he hopes that stakeholders will grow to understand that there’s a great need for quality control professionals in the field.

“We need more professionals in place to assure that we can have a sustainable industry going forward, and not just a bunch of people doing a sideshow to make a quick buck and get out,” he said.

To illustrate the problems faced by the industry, in both the regulatory and business management aspects, Gordon brought up an example of a recent client of his, which was planning to roll out a cannabis-infused beverage. The company, he said, was created by someone from New Jersey who moved to Pennsylvania, was sourcing the product from Nevada, and wanted to operate it in California. Setting up this business was a headache, Gordon said, especially since it was a challenge even getting the client company to appreciate the scale of the task before it. While the rollout was eventually successful, he noted that the task required navigating complex regulatory issues in multiple jurisdictions; any mistake could have resulted in the government coming in and shutting the company down. 

“How do you solve that mess? The ultimate solution is a very complex answer, and it comes down to making sure there’s proper legal entities in all the proper jurisdictions, that the sourcing is done in each of them, and that there’s a lot of filings, a lot of follow-up—but ultimately it was worth it because now they’re up and running and having a little success,” he said.

In addition to educating conference attendees about these types of complex situations, Gordon said that he hopes the event can connect those in the industry with the business professionals who can help solve them.

“This event is great for just the networking alone. You’re bringing together all types of people: cannabis industry investors, finance professionals, and CPAs and attorneys with experience in the industry. That is such a rare opportunity. For someone who has been a practicing CPA or attorney for many years, this is like going to school for the first day all over again,” he said.

To learn more about the Cannabis Conference and to register, click here.

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