Federal Reclassification of Medical Marijuana Brings Tax and Banking Relief, but Leaves Questions Unanswered
The reclassification of medical marijuana from Schedule I to Schedule III under federal drug law is expected to ease taxes and banking for South Dakota’s medical cannabis industry, according to state officials. The change, which took effect in April, will allow businesses to claim business tax deductions and gain access to banking services.
However, state officials are still seeking answers about the broader impact of the reclassification. Whitney Brunner, administrator of the state’s medical cannabis program, told lawmakers that the federal government has provided little information about the change, aside from requesting data.
The reclassification is expected to benefit medical cannabis businesses, which have long been blocked from taking certain federal tax deductions due to the drug’s Schedule I status. Banks have also avoided working with cannabis businesses due to the drug’s illegal status under federal law.
Nicole Ezeh, a presenter with the National Conference of State Legislatures, said that the reclassification will allow medical cannabis businesses to claim deductions and ease banking access. The change is expected to benefit businesses such as Puffy’s Dispensary in Rapid City, which is currently undergoing the DEA inspection process to become licensed under the DEA.
Despite the benefits, questions remain about the impact of the reclassification on South Dakota’s medical cannabis industry. Brunner told lawmakers that the state has more questions than answers at this time, and that the department is still working to implement the changes.
The reclassification comes as South Dakota’s medical cannabis program is in transition. The state’s department of health has overhauled its medical cannabis inspection program, creating new procedures and training, reorganizing its supervisor structure, and adding a formal process for businesses to challenge citations.
The changes are expected to make it easier for businesses to operate in the state, with a proposed rules package simplifying language around inventory tracking training and reducing the amount of time businesses must store security camera footage. The package would also restructure the fines system, making first-offense minor violations result in a corrective action plan rather than an immediate fine.
Overall, the reclassification of medical marijuana is expected to bring relief to South Dakota’s medical cannabis industry, but it remains to be seen how the changes will impact the state’s program in the long term.
