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Ep.169: Henry Wykowski, Introview w/Jeannette Ward, MCBA

Cannabis Economy Podcast
Ep.169: Henry Wykowski, Introview w/Jeannette Ward, MCBA

Ep.169: Henry Wykowski, Introview w/Jeannette Ward, MCBA

No taxation without representation is a refrain familiar to anyone who’s been in a history class in the united states of america. Henry Wykowski joins us to discuss his representation of various cannabis businesses on taxation, in this case- 280e.
He takes us through his evolving interpretation of it’s language and discusses the meaning of a few significant cases, how they affect each other as well as the current reality of finance in running a cannabis business. But first, Jeannette Ward joins us to give us an update on the Minority Cannabis Business Association and what to expect from the group in August. Henry Wykowski preceded by Jeannette Ward

Transcript:

Speaker 4: There's a lot of busy. Mom.

Speaker 1: It's a busy month. We've got a survey coming out. We've got an event happening. The event happens first. We're going to Michigan.

Speaker 4: We are going to. Detroit's a. we're having an event at cannabis diversity summit, so him CBA and Charlotte Green as our emc and board member, we are partnering up and we're bringing the Charlotte Green diversity summits together with the minority cannabis business association networking rallies and so they are now the MCPA cannabis diversity summit. Bigger, better and more value to our members and August the 13th is our first summit in Detroit,

Speaker 1: August 13th. I think that's a Saturday.

Speaker 4: That is a Saturday. Nine am to 9:00 PM.

Speaker 1: Really no excuse for not going. If I'm in Michigan and I'm listening to this, what am I to expect from an CBA event or diversity event?

Speaker 4: You are going to hear information that's relevant to you. If you are a cannabis business owner or you aspire to be one information about the laws that are coming in Michigan, so there's some laws that will be active soon. You need to understand this law. She had to make sure that as you prepare your business or attempt to keep your business legal, that you know what those laws are and you're complying and we're going to talk about activism efforts in line with those laws so we make sure that they're the most inclusive and create the most opportunity for our members. We're also going to share information about medicating with cannabis. So our, uh, Dr Rachel Knox, one of our board members will be talking about cannabis and the endocannabinoid system and how we can use this medicine to the best use for people of color and there will be job information specifically. So if you're looking to get your wet in the industry and get a job in the industry, will have some information around that. Um, and then there's networking, there's time for just talking with other cannabis entrepreneurs and networking and finding those relationships and connections and having a little fun while we do it at the end of the event.

Speaker 1: That's fantastic. Rachel box. Dr Rachel Knox, Doc Knox as I call her a is a font of information. She's been on another speaker, a major Neil Franklin has also been on and I understand he's making the trip.

Speaker 4: That's right. Executive director, Neil Franklin will be one of our guests speaking about issues pertinent to to this industry and frankly issue that are really pertinent right now in the conversation at large. If you haven't heard of Neil Franklin, it maybe just because you didn't realize you were watching him. He's been on CNN quite a bit lately, talking about what's going on in in theU , s with the killings of African American men and women by by law enforcement, and so leap is a great organization, has got great views on how we can evolve law enforcement. So leap is law enforcement against prohibition. That's what that stands for. So they are a fantastic group that's really thinking about how do we change our, our drug policy and our drug laws so that we're spending more time focused on the things we need to be focused on is law enforcement and as communities and less time worried about drug and fractions, especially on cannabis. So he's just a great voice to hear from and we are excited that he's going to be speaking and we'd love to see, see the Detroit community represented and engaging in this conversation with Neil.

Speaker 1: Yeah, no, absolutely. And if you're within driving distance of Detroit and you've never been in the presence of Neil, it is worth the trip to just hear him talk about what he talks about. So, uh, that's a great get. Um, you know, this is the third one. Uh, we, you know, we did one in Portland, did one in Oakland. What's your feedback from the groups that have been, um, at these things before? What are, what are you hearing from them? What do they appreciate folks that have been.

Speaker 4: There's a lot of busy. Mom.

Speaker 1: It's a busy month. We've got a survey coming out. We've got an event happening. The event happens first. We're going to Michigan.

Speaker 4: We are going to. Detroit's a. we're having an event at cannabis diversity summit, so him CBA and Charlotte Green as our emc and board member, we are partnering up and we're bringing the Charlotte Green diversity summits together with the minority cannabis business association networking rallies and so they are now the MCPA cannabis diversity summit. Bigger, better and more value to our members and August the 13th is our first summit in Detroit,

Speaker 1: August 13th. I think that's a Saturday.

Speaker 4: That is a Saturday. Nine am to 9:00 PM.

Speaker 1: Really no excuse for not going. If I'm in Michigan and I'm listening to this, what am I to expect from an CBA event or diversity event?

Speaker 4: You are going to hear information that's relevant to you. If you are a cannabis business owner or you aspire to be one information about the laws that are coming in Michigan, so there's some laws that will be active soon. You need to understand this law. She had to make sure that as you prepare your business or attempt to keep your business legal, that you know what those laws are and you're complying and we're going to talk about activism efforts in line with those laws so we make sure that they're the most inclusive and create the most opportunity for our members. We're also going to share information about medicating with cannabis. So our, uh, Dr Rachel Knox, one of our board members will be talking about cannabis and the endocannabinoid system and how we can use this medicine to the best use for people of color and there will be job information specifically. So if you're looking to get your wet in the industry and get a job in the industry, will have some information around that. Um, and then there's networking, there's time for just talking with other cannabis entrepreneurs and networking and finding those relationships and connections and having a little fun while we do it at the end of the event.

Speaker 1: That's fantastic. Rachel box. Dr Rachel Knox, Doc Knox as I call her a is a font of information. She's been on another speaker, a major Neil Franklin has also been on and I understand he's making the trip.

Speaker 4: That's right. Executive director, Neil Franklin will be one of our guests speaking about issues pertinent to to this industry and frankly issue that are really pertinent right now in the conversation at large. If you haven't heard of Neil Franklin, it maybe just because you didn't realize you were watching him. He's been on CNN quite a bit lately, talking about what's going on in in theU , s with the killings of African American men and women by by law enforcement, and so leap is a great organization, has got great views on how we can evolve law enforcement. So leap is law enforcement against prohibition. That's what that stands for. So they are a fantastic group that's really thinking about how do we change our, our drug policy and our drug laws so that we're spending more time focused on the things we need to be focused on is law enforcement and as communities and less time worried about drug and fractions, especially on cannabis. So he's just a great voice to hear from and we are excited that he's going to be speaking and we'd love to see, see the Detroit community represented and engaging in this conversation with Neil.

Speaker 1: Yeah, no, absolutely. And if you're within driving distance of Detroit and you've never been in the presence of Neil, it is worth the trip to just hear him talk about what he talks about. So, uh, that's a great get. Um, you know, this is the third one. Uh, we, you know, we did one in Portland, did one in Oakland. What's your feedback from the groups that have been, um, at these things before? What are, what are you hearing from them? What do they appreciate folks that have been.

Speaker 4: This is my baby on the one hand, CBA, so I'm going to be glowing, but it is not flowing because it's my baby. These are really great events. The people who come out, but diversity of the people who come out. We have industry veterans who show up where you can rub elbows and shoulders with some of the bigger names in cannabis, which is wonderful because at the same time we have people, they're equally represented who are just starting in the industry or not even starting who aren't sure where they're going to start at the industry and so you have this wonderful opportunity to have conversations, learn from people you might not otherwise be in the room with and it's really educational so people are expecting a couple of quick speakers and when, when the event's over, it's a wealth of knowledge that you couldn't otherwise get packed, packed into a couple of hours. So it's worth absolutely worth the price of admission and worth the drive if you were in Detroit.

Speaker 1: Yeah, it, it, it was, you know, I was at the Oakland one and there really is a special feeling there with folks that are trying to get into the industry to the very top of the industry. I'm in. Genders are really kind of special kind of vibe. It's indescribable.

Speaker 4: Yeah. And, and, and it's, it's all these likeminded people sort of rode around this cause that we care about making this plant legal and giving people access to this medicine. So it's just a great opportunity. You've been at home alone, passionate about this topic. Get in a room with other people and let's see what we can get done.

Speaker 1: There we go. All right. But that's only one of the. Oh, by the way, if we want to find out more about that, uh, where do we go? What did we do?

Speaker 4: You can go to our website and you can find out more about the events. You can also just search for minority cannabis business association on event Brite and you can pull up the link there and buy tickets.

Speaker 1: Can I become a member on the MCB a website if I want it to?

Speaker 4: Absolutely. And if you become a devoted level member, your admission to this event is free. So go check out our member levels. Um, we'd love to have you as a member.

Speaker 1: Excellent. All right. So, uh, and, and we're looking for either devoted or not devoted

Speaker 5: and yes, they're all on the bus or you're not.

Speaker 1: Yeah, exactly. All right. So, um, you know, speaking of the bus there is not only one stop, it's not just the event. There's also this big survey, um, that you, um, have been sisyphean about, uh, what's going on here because this is going to be, um, this is exciting I think,

Speaker 4: but I can't let the word Sisyphean just like go,

Speaker 5: like, even know what that.

Speaker 1: Oh, you don't. Oh, sisyphus. The Sufis is the guy that uh, push the boulder up the hill and he was consistently pushing the boulder up the hill and he kinda, he never got up there, you know.

Speaker 5: Well, I certainly hope this boulder gets up and down the hill. Well we don't have today, but it did not exist, is actual data that tells us

Speaker 4: how many people of color, how many women, how many lgbt we have represented in the cannabis industry as either owners, professionals or investors. So this survey will be the first comprehensive survey that have been. There had been no actual surveys to collect this data, so it will be us, all of the US, all regulated markets collecting data on those three things, investors, employees or owners, and getting demographic data that allows us to understand how diverse is this industry. In fact, where do we see more diversity by state and what does that tell us importantly about policy, where is policy working to create more diversity in this industry? We all feel like there aren't enough minorities in this industry. I certainly expect us with the survey will tell us, but it allows us to be fact based. We can have conversations about facts, not feelings, and we can narrow down where we have more opportunity, not just by state but also by business. So we have more ancillary businesses that are represented by minorities. Do we have not enough cultivators and minorities represented as cultivators? So where do we target our efforts to increase diversity? Um, it'll give us a heat map and it'll give us a pathways to know what's working and what's not.

Speaker 1: So we can be change makers in the way of that. Right. All right, fantastic. Okay, good. So when does that come out, that survey, so we can kind of pay attention

Speaker 4: August the 15th, pay attention, we would like everyone, everyone who owns a cannabis business or invest in a cannabis business to take this survey. So you're a cannabis business owner, we want you to take this survey for your business. Um, so this is not a survey just for minorities because then we don't get a true picture of the industry. We want to understand who all the owners are. Um, and then we will segment out how many of them are women, how many of them are of color. We will do that, that, those views slices, but we need everyone to take the survey.

Speaker 1: Yeah. Because the whole goal is to have a truly full community. Right. Okay, perfect. And is that going to be on the website as well? Yes. Yes. Wonderful. Alright, so by the time this gets up, you know, a lookout for the uh, first, the Detroit, uh, event and then the, and then the survey. Um, and I guess that's enough for, for August. Yes. Janette?

Speaker 4: Yes. That's plenty for August

Speaker 1: because that's not counting your day job.

Speaker 4: That's right. And mj freeway

Speaker 1: and there's a uh, there's a plug, you know, I always appreciate the time that we spent together a albeit telephonically,

Speaker 4: telephonically and Sisyphean.

Speaker 1: Exactly. Oh, Jeanette Ward. Thanks so much. We'll see you down the line. Okay. Bye. Bye.

Speaker 3: This episode is supported by twister. The general consensus is that trimming socks, but it doesn't have to. If you're interested in supplementing your hand trimming or even replacing it entirely, check out twister, tremors. UPTIME is crucial for your harvest and twisters. Got Your back with over a decade leading the industry. They've got the knowledge, experience, and technology to keep you running smoothly. Twister, termers are designed for continuous flow, run time, minimizing, handling. Why? Tumble Tumbler Churn for 20 minutes when 30 seconds. We'll do go to twister, tremors.com for more information. This episode is also supported by Focus. Focus is working on independent and international standards while offering third party certification for cannabis. The foundation of cannabis unified standards helps build your business into the best it can be. Focused is not a regulatory agency, so they don't engage in enforcement rather than the organization is in place to help improve operational efficiencies, decrease operating expenses, and ultimately increased profit focus will help you build your business in a sustainable way. Guarding against risk and liability all while protecting your Ip. Go to focus standards.org. Okay. So, uh, I don't like to talk about it

Speaker 6: originally from Long Island and I just learned so are you. I am. I am. And it was a great place to be from. I enjoyed growing up there and uh, it's where I first started to smoke cannabis and what we used to do because it was really illegal then was we would go down a great neck and was on a peninsula all around, on the long island sound and we would go down to one of the docs and walk out to the end of the dock and get stone. They're based on the theory that if somebody called the cops, we would see them before they could get to us and we could further grass into the sound. Literally have it. Henry. Why Koski don't, uh, from the D'angelo brothers, if you will, as the lion, right, the lying of litigation, that's what they like to call me. So you have been involved, sir, uh, in some really important decisions and we really want to talk about tax law and somehow I just told you, you make a to 80.

Speaker 6: Interesting, right? Well, uh, I think that, um, uh, I guess in a way that's a compliment. I mean, it's a complete compliment. It's a, uh, I mean, it's a, it's a bane on the industry. I would think that, uh, the irs through to 80 in banking or the two major issues facing the industry right now. And um, I, uh, I got involved in representing the industry, uh, with respect to, to ate when the irs decided, uh, in conjunction with the Justice Department that since the US attorney was not successful in closing down the cannabis dispensaries in San Francisco for political reasons primarily, uh, that, uh, the way that they could maybe slow them down or close them down would be through taxes. I mean, after all, that's the way they got al capone and somebody came up with a bright idea that this is how we're going to put a dent into the medical cannabis movement.

Speaker 6: Right? So they ordered it champ and uh, the attorneys that represented champ just in case, because we do have some folks that aren't a 100 percent in the industry, a breakout champ for us. So we know what you're talking about. Okay. Yeah. Champ was one of the original cannabis dispensaries in San Francisco. It stood for Californians helping to alleviate medical problems, champ. And it was a very successful and well a well run dispensary had a number of people there. A Michael Aldridge was the executive director, one of the early people in the movement and uh, the irs decided that they would audit them and actually argued initially under to add that to add not covered only a business expenses, but it also included the cost of good sold. So shorthand trafficking controlled substances essentially is to 80 if you want to break that out further for us.

Speaker 6: Right? Okay. Well, to act says that if your business is engaged in or, and consists of rather the trafficking of controlled substances, that you're not allowed to take your ordinary and necessary business expenses. And uh, that was the, the, it was passed in 1982 to the best of my knowledge. It was never used until the, um, they, they started to use it. The irs that is started to use it against champ. And that was in, I think the audit probably began around 2005. We had the trial and 2007 maybe 2000. Yeah, 2007. The decision came out about six months, so six months later. But, um, after I was retained by a, uh, Mike Walter to represent champ, uh, I went to the irs and I said, okay, why don't we talk about how to resolve this? And they very arrogantly said that, well, you know, there's only one way to resolve a pay what you owe us.

Speaker 6: Which at that time I think the assessment was like $490,000 or go to trial. And of course to a trial lawyer. I mean, that's a no brainer, uh, lunches or go to trial please. What do, what do I have to lose? I mean, you know, it's one thing if they say, well, we'll give you a million dollars off, and then you got to go back to the client and say, well, you've got a great case, but you've got to weigh the pros and the cons. There's an option later when there's, when there's no option. Basically you go to trial. And the trial went very well, I think in large part because the irs was so arrogant. But at the beginning of the trial, I raised the issue of the cost of good sold with the judge. And um, he asked the irs what their opinion on that was.

Speaker 6: I said that, look at it, it doesn't make it to 80. He does not apply to cost of good sold. They're not a business expense. It's what's called an above the line item. And the judge said, you know, you ought to think about what he's saying because he's, he's, he's right. That's my interpretation of the law. So the next day they came back and conceded that issue, just like that, just like that. And the judge actually memorialized it in a footnote in the champ case. Uh, and right there I thought we had a significant victory because the largest part of any businesses, uh, expenses or cost of doing business is the cost of good salt. So after you deduct the cost of good sold, then you have what's called the gross profit and then you start to deduct your ordinary and necessary business expenses. And the irs took the position because champ was selling cannabis that uh, all of it's ordinary and necessary business expenses were nondeductible under two 88 controlled substance.

Speaker 6: Yes sir. We took the position that wait a second to 80 applies to controlled substances, but they were also selling non controlled substances and they were also providing a holistic and wellness services. And since there's no to 80, he provision that's applicable to them. That what we have to do as an allocation, and we use the example of a perfume counter at macy's under cost accounting, if the, if the perfume counter took up 15 percent of the floor space, you would allocate 15 percent of your expenses to the perfume counter and 85 percent of your expenses to the other items, the rest and not all. Perfect. There you go. There's underwear and ties and umbrella. Anyway, by the way, not a commercial for macy's, but go on now. Well, that's the example. I used the trial and that's why I used it here. Yeah. Uh, the um, the judge then looked at the irs and said, well, what do you have to say?

Speaker 6: And they said, oh no, none of it's deductible. And he said, well, again, he's got the better argument. So let's go through an allocation. And the judge at the end of the trial basically agreed with us and a disallowed 15 percent of their expenses, but allowed 85 percent. Now, to put the importance of this decision in perspective for the industry, they went into trial with about a half a million dollar tax bill, $500,000. At the end of the trial, the judge awarded them 4,900, one percent of what they asked. And I like to say that they were so embarrassed about that, that they didn't try to collect it or they haven't even. Wow. Okay. Interesting. Now we never heard from them after the decision came out. Uh, so anyway, uh, that was the, uh, the, the first and seminal case in the, uh, in the, uh, uh, a tax court involving the cannabis industry. Since then, there had been a five other cases that have a. wait a minute, let's see. This chair.

Speaker 6: Yeah. There are six cases that have gone to trial and we have tried for them. You want to go with Oliver? Let's go with all of. Well, all of was a, uh, it was an unusual case. Uh, uh, Martin, all of random dispensary here in San Francisco known as the vapor room. It was a very great. It was a good dispensary. Essentially Martin catered to the indigent community and he actually had a special license from the city of San Francisco that allowed people to medicate a at the viper room because, uh, the, um, most of them lived in section eight housing and if they're medicated at home or possessed at home, that could possibly be evicted. So He allowed them to do that where he was. And his dispensary was so well regarded by the city of San Francisco and the medical profession. The practices here that the CSF bus, the shuttle bus would actually take people from chemotherapy and drop them off at the viper room if that's where they want to go.

Speaker 6: Direct the ADB, yeah. Now, unfortunately we didn't get involved in that case in until it was already in tax court. And the bottom line is, is that all he did was sell cannabis and provide a place where people could use it. And in that case, the judge who was clearly not sympathetic to cannabis at all ruled that based on the fact that his, all of his income was only derived from the sale of cannabis to 80. Applaud to all of his expenses. That was an unfortunate decision. A part of the decision, a great part of the decision was, is that since all of had gotten involved in the industry, when there were still the threat of raids and people didn't keep records because they didn't want them to get seized and rates, the judge allowed him based on testimony that we had presented from other people in the industry.

Speaker 6: She allowed 75 percent of his gross sales as his cost of goods, cost of goods sold figure, even though he couldn't substantiate that amount. Uh, why, uh, how he had a good lawyer. Uh, how, uh, why? Uh, well, basically, uh, there's a, um, there's a, there's a tax court case called Cohan and cohain stands for the proposition that, look, if you're selling something, even if you can't prove what you paid for it so that you could sell it, you had to have paid something and that's your cost of goods sold. So even if you don't have the kind of record, the irs would like to see, you're still entitled to something. And then the burden shifts to the taxpayer to prove what that amount should be. And we introduced testimony from experts in the industry that based on this industry, you could expect at that during the years that were under audit, the cost of good soul to be somewhere between 65 and 80 percent of what the gross sales were.

Speaker 6: And in that case, the judge allowed a 75 percent of the, uh, of the, uh, of the gross sales and cost a good soul. All right, so we're making headway here. What I would like to get to is the harbor side, uh, you know, you, you just did that. Um, there are, I guess two or three others that you were involved in. Give us highlights, if you will, to connect the dots so that we can talk about harborside in the present. Well, I think the, the, the case that we did that proceeded harbor side was the ultimate trial that was done in December of 2015. Uh, and, um, I think that the ultimate trial was an important one to go to trial for the industry because I think we, we had a strong case as to, uh, not only the cost of goods sold and an allocation, but I felt that the, the, the, the argument that that case was good for, for the industry was the unfairness of imposing any penalty if the taxpayer didn't get it right and doing their allocation.

Speaker 6: Okay. And, uh, Laurel Altman, who was the proprietor of a ultra meds was a 70 year old woman she got into the business because she was a cancer survivor. She had a very small dispensary in Louisville, Colorado. Louisville is sort of a little bit outside of boulder on the way to Denver. And the irs was just brutal with her. And, uh, we, we, we don't have the decision in that case yet, but I think that, uh, in that case, we're hoping that the judge rules that you got a taxpayer who admitted on the stand, she didn't know anything about cannabis, but she went to a cannabis lawyer to get advice as to how to do everything right. She went to an accountant who said that he prepared tax returns for cannabis dispensaries and knew how to do it right. She relied on them. The irs said she didn't get it right.

Speaker 6: Uh, if the irs is right and that her taxes were not properly computed under those facts, it would be unreasonable in inappropriate to assess a penalty and to her right. But once we established that principle for the industry, it carries over because most of the people that are filing tax returns are trying to do it right. And then depending on professionals to do it. That's right. And one of the arguments that we've started to make in tax court is, is that, look, one of the reasons more and more of these cases are going to trial is because the service refuses to give us guidelines and parameters that they give to every other industry. If you had a shoe store, I could tell you what they believe the appropriate parameters are for your cost of good sold, what your appropriate parameters for your expenses are. And then the industry would have guidelines that the responsible people could go out and file.

Speaker 6: You know, the way the tax returns are selected for audit is that they're scored. And the way that they're scored is based on the um, ratios. So somebody, for instance, who's making $100,000 a year, who claims they have business entertainment expenses of 80 percent or $80,000, they're going to get audit that's a little too much, but somebody that's in the 10 to 20 percent range that they find except the bolt, then you're not going to get audited. There you go. So that's what they look at. Now, that brings us to harbor side. And, uh, the, uh, the Nice thing about representing harbor side is Steve and I, Steve de Angelo and I have become good friends and we think a lot of alike and he's not, he, he's not afraid to fight. I'm not willing to quit. And it's a dangerous combination and dynamic duo. Well, it, it, it did work out well because Steve originally came to me when he was, um, uh, when harborside got the audit notice, but over the years we became good friends and uh, we did a lot of work together and when he was served with the harborside forfeiture case, he asked me if I would represent him because everybody else was telling him, this is the end of the road.

Speaker 6: You're going to have to close, forget it. You're over. And I said, well, look, if you know, if it's the end of the road and you're going to have to close, which I don't think you will, let's go out with a bang. Let's fight it. So let's take this tangent. Just bring us through that. Yeah. And, uh, and so, um, basically, uh, you know, six weeks ago, maybe seven weeks ago, uh, after four years of fighting with us, the Justice Department threw up their hands and said, we quit. We're walking away. And uh, you know, the only concession that we had to make in that case was we had to agree that we wouldn't sue them for bringing the forfeiture to begin with. I think that's a tremendous victory. I think that they will, the Department of Justice will think twice before they attempt any other forfeiture action. But we have going on, on a tangent.

Speaker 6: So let's go back to the tax case. Right? Okay. Well, the great thing about the tax case was, is that, uh, Steve was willing to put up a fight, not only for harbor side but for the industry and because he trusted us. So he allowed us to explore a lot of areas and we came up with, uh, we, uh, we came up with some arguments that we think will benefit both he and the, uh, excuse me, both harbor side and the industry. Right? And we saw this as an opportunity to once again challenged the applicability of, to add to the cannabis industry, uh, keep in mind that to 80, he was first passed by Congress in well it was passed by Congress in 1982 and it was a knee jerk reaction to a tax court case involving a drug dealer in Minneapolis. And his name was Ed.

Speaker 6: Mr In Edmonton took the position that well, even though I'm involved in an illegal business, if you expect me to file tax returns like everybody else, which you have to do, even if you're involved in an illegal business, uh, you, um, you have to allow me to take my business expenses as deductions like you would anybody else. And the IRS said no. And he basically went to tax court and won. And the judge said he's right. If you want him to pay taxes, you got to treat them like everybody else. Again, this was during the height of the war on drugs. Congress was incensed. So they passed two 88 now. That was 14 years before medical cannabis was legalized anywhere. A prop to 15 was in 1996 in California and nobody foresaw when they passed a to age that this was even on the horizon.

Speaker 6: And so, uh, in the champ case, I argued that to 80, he doesn't apply because what they're, what champ was doing is not trafficking. They had a license from the city of San Francisco to do this. They weren't trafficking, trafficking connote to illegal activity. Uh, the judge who I liked in that case, a judge Laura was, he was, I think he's a conservative guy, but he was fair and that's all we ever really want is somebody that's fair. Uh, he said that he thought that that was a good idea and he wanted to think about it overnight and he would tell us further in the morning what he, how he felt on that. He would make a ruling and it came back the next day and he says, you know, I, I think it was a very good argument, was a clever argument. He said, but if you look at the dictionary, the definition of trafficking is broad enough to include both legal and illegal activity.

Speaker 6: And so I'm going to rule the to add, does apply now in preparing for the harbor side case, I wanted to raise that again because words have different connotations during the period of time that they're used. How do you mean? Let's just. Oh, I'll give you an example. So, trafficking in 1982 may have, I would have argued the trafficking in 1982 despite whatever the dictionary says. Basically when you hear the word trafficking, you think of illegal activity. Do you think Miami Vice. That's right. Yeah, that's right. I mean, basically you don't traffic and cars, you sell cars. Okay. Uh, you traffic in illicit substances. Okay. So, uh, I wanted to go back to that argument, but this time a harborside allowed me to, uh, consult with an expert, a linguist, uh, from the University of San Diego that is an expert in linguistics and the law. And in working with, with him, uh, one of the things I came to appreciate as well as one of the lawyers in my office, Andrew share had been pushing this idea for a number of years that we should focus not on the word trafficking.

Speaker 6: What we should do is focus on consists of. And the example I gave yesterday when I spoke on this, uh, at the conference is you would not say that New York City, excuse me, that New York consists of, you know, Manhattan and the Bronx. New York is five boroughs. So that's right. It includes Manhattan and the Bronx, but it consists of Manhattan, the Bronx, Staten Island kings and Queens counties. So if you read consist of correctly, it only applies to business entities that do nothing but sell cannabis because if you do something beyond selling just to cannabis to your business consists of more than just Manhattan. Okay. So, uh, we, of course, harborside not only sold cannabis, but it's old non-cannabis items such as rolling papers, vape pens, hats, shirts, books, that kind of stuff. They also, I'm pro provided a wide range of holistic services to its patients. They also were engaged in activism on behalf of the industry and also they developed a brand, the harbor side brand, which has come to represent the gold standard of the industry.

Speaker 6: When people hear the word harbor side, they think of a clean self, well lit, safe place to buy their medicine. They know what they're going to get. This isn't buying something out of the trunk, and that in and of itself is an asset of the business which takes time and costs money to develop. So we argued that to Ada should not apply to harborside because harbor side consists of all of these different activities and not just the sale of cannabis. Now obviously we don't have a ruling on that yet and we're not going to have one for a while, but, uh, that has the potential to remove, to ade as a problem from the industry forever, which is Gargantuan. Can you, from your perspective, explain, uh, the size of the boulder that will be lifted from the shoulders of the entire industry?

Speaker 6: Now? I mean, what I can do is give you an example that somebody could understand and that's take a dispensary that has a million dollars in a non, a, excuse me, a million dollars in expenses that would be disallowed under two 88. Okay. That means under on that million dollars of expenses, they're going to have, assuming a tax rate of 40 percent, they're going to have to pay $400,000 in taxes. Okay? So if you eliminate to ade, that means they've just made another $400,000. Percentage wise? Yes, substantial. Well, if you take a a, a dispensary like harborside for instance, and this is public knowledge, so I'm not releasing anything. Their sales are in the $30,000,000 a year range. Now assume that on a $30 million dollars a year in sales, you have maybe let's say $10,000,000 in expenses, and if half of those expenses, $5,000,000 was disallowed under to Ada by eliminating two, eight, eight, two, two 80, he, you've now added an additional income of $2,000,000.

Speaker 6: And now multiply that by all the dispensary's and the figures that we now will see, uh, in the, uh, in the papers and the magazines about how big of a business industry cannabis is. We're talking serious money. Here we go. So, uh, we'll, we'll say a thank you at the appropriate time. How about that? Uh, well actually, I'd like you to do more than just say thank you. What I'd like you to do is remember that if we win this case, I'm going to be giving up a lot of business and uh, you know, although, uh, Steve has assured me that there's plenty of other things he would like me to work on A. I mean, we are kind of shooting ourselves in the foot, but you know what, I don't mind that at all. It would be worth it. I'm not worried about this.

Speaker 6: I say that joking. Yeah, no, of course. And as you are joking, I will say, you know, you have a, uh, an opportunity to be a cohost here if you'd like, you know, if business dries up. So. Oh, okay. Well thank you. Okay. A couple people for jobs as a bud tender and I think that that would be relaxing, relaxing after the trials, but a okay, I'll cohost, I'll bud 10. I'm sure people will find stuff for me to do. Exactly. Just one final thought before we get to the three final questions, which I'll ask you in a moment. The final thought is, you know, uh, in terms of costs of goods sold and in terms of the irs coming down and, and uh, suggesting to a lawyers and CPAS and attorneys and uh, there was the, the point that um, you know, hey, your, your cost as she could show, excuse me, you're a good child.

Speaker 6: Should probably be just a 35 or 40 percent. When you hear advice like that coming from a, you know, a fellow, Esq. What does that do to you? Well, I'm a fighter and so, uh, I mean basically it on the face of it. It appears unreasonable to me and my, my, uh, my, my response and you heard it is go to trial. The more of these cases We go to trial. If the irs isn't going to be reasonable on its own, the tax court will reign them in the parameters that we've established for the industry that exists today were established through champ, through all of, through alternates and now we're, they're going to be established through, through harbor side. So if they won't tell us, we'll let, let's make the tax court tell them. Uh, and sometimes that's what you have to do. I mean, you know, look at how civil rights the civil rights cases came about.

Speaker 6: I mean, basically it was slow going. It didn't come from the state governments. It came from the courthouses. And if that's the way we have to go on, I'm happy to be part of that. Let's do it. Excellent. Three final questions. I'll tell you what they are and then I'll ask you them in order. First one is what has most surprised you in cannabis? Second is What has most surprised you in life. And the third is on the soundtrack of henry. Why count [inaudible] life? What is one track? One song that's got to be on there. So the first question is, what has most surprIsed you in cannabis?

Speaker 6: Um, that's kind of a tough one because I had a shoulder deep. I kinda think that when I first started to smoke, eventually I realized everybody would sort of catch on that this was a great thing. Uh, I think that what's surprised me the most is the resistance of the federal government at this point to change its position. I mean, you know, they're just delegating this to the states. Uh, and uh, you know, the, all the polls now show the majorIty of people think that it's a waste of time and money to go after cannabis. Uh, they think that it's something nobody believes it's a gateway drug anymore, you know, those arguments are rolled down the tube. So I guess I'm surprised at that. And um, and then I'm also saddened by the fact that there are still people that are incarcerated for possession with intent to distribute cannabis. I think that once, I think that once the industry achieves legalization, we should address that social injustice next. Yeah, absolutely. What has most surprised you in life?

Speaker 6: Uh, that I would wind up playing such a prominent role with respect to what? To cannabis. Pretty cool, huh? Yeah. I'm, I'm, uh, I'm really happy about that. Uh, I really, I, I mean, I love what I do. Yeah. My kids asked me, well, why do you work so much? You know, you know, you're doing okay. You don't have to get up and work seven days. I'd love it, man. This isn't work. This is like a course where make. It is a cost. It is, you know, it happens to be work. It, is that how you feel that's how you come off. You know, you put it however you like, but people tell me that they can tell that I'm happy having the role that I have. Got It. I'm still going to get up tomorrow and do the same thing. So they call it whatever you want.

Speaker 6: Right. Okay. That's right on the soundtrack of your life. Henry. And the times are a changing. Oh, that's a good one. There you go. That was simple. That was the easiest of the three questions. And sometimes it is. Henry. Why caskey? Thank you so much. Do you mind if we ping you again when we get that decision down the line? Absolutely not. What happened? Whenever that decision comes down, I think that it's going to take some analysis by people that are involved in the industry. I mean, obviously if it's a clean when, uh, we could talk about it, but then we can talk about how we could use that win to, to, to, to move on to banking and the other problems that plague the industry. If it's not a clean win, then we have to analyze it. We have to decide whether or not we should appeal the decision. Uh, we have to decide what, what stronger arguments, uh, we can make the next time around because we're not going to give up until we get what we want because that's what we're entitled to. There you go to 80 enough is enough already. You've got it buddy. Okay. Thank you sir. Thanks

Speaker 3: henry. Thanks for having me. and there you have henry. Why koski? So, you know, um, I have a feeling that a thanks or ode to that man, or at least, uh, they certainly will be eventually if they are not already a thanks to jeanette ward for giving us that update. And if you're in or around the detroit area, go ahead minority cannabis.org and get yourself a ticket. Thank you so much for listening.

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Cannabis Economy is a real-time history of legal cannabis. We chronicle how personal and industry histories have combined to provide our current reality.