Legal Eyes: Marioâ€¨
By: Pamela Jayne
This column started as a way to introduce the frontline fighters, the suit and tie wearing warriors, to the people who most benefit from their work, the patients. Attorneys are, of course, the primary focus of Legal Eyes, but I have come to realize that there are other professionals that this movement heavily depends on. This is what led me to Mario Ceretto, CPA. We all think of the law and lawyers when we think of the fight to legitimize the medical cannabis industry; but what about the money? What about the numbers? This is where Mario comes in. He may not wear a suit and tie, but he wears his passion for the rights of medical cannabis patients and providers on his sleeve for the entire world to see. From his not so long ago days as an idealistic student at UC Santa Cruz, to his works right here in his hometown, Mario has never strayed from his core beliefs.
Will you start by explaining what a CPA does, and how your services benefit the medical cannabis community?
Iâ€™ll start by saying that my first job was at a national accounting firm where I was limited to doing audits of very big public companies, like Nike, Ralphs, and Vons. I quit that and went on to gain more experience in other areas. Now I am a one hundred percent, independent CPA. What I do is help collectives keep their books and transactions in the most compliant manner. â€“The day-to-day reporting and accounting of things; that is what I do. I file tax returns for individuals and for businesses; bookkeeping; plus, there are many compliance issues, such as Prop. 215, SB 420, and the Attorney Generalâ€™s guidelines that are all very vague. But with a CPAâ€™s background, we can make sure that they are compliant with these guidelines. Also, in this industry, there are two agencies that we must be aware of, the State Board of Equalization and the IRS, because they both know that this industry is ripe for cash.
Why did you choose to specialize in the medical cannabis industry?
When I came out of the workforce, I was unemployed for six months, even with a CPA license. I picked up the California NORML listing one day and called every single shop listed. This was in the fall of 2009. There were just over 60 shops listed and only two called back. I started by just doing volunteer bookkeeping, being paid very minimally.
Why is it important for a collective to retain a CPA? How many collectives do you work with?
I have worked with about 50 collectives in the past year. Not all of them on a continuous monthly basis. It is highly important to understand what the tax implications are ahead of time, rather than waiting until it is too late and you have this big tax bill due. So from that perspective, it is very important to have a CPA for planning purposes. Also, for transactional compliance, it is very important to make sure that everything about a collective is as compliant as possible to the current guidelines, which are very vague. Keeping complete books and records shows that you are complying to the best of your ability.
There is a big misconception that all medical cannabis collectives are making big bucks, but we know that this is not the truth. Will you explain and clarify the rules that a Mutual Benefit Non-Profit Corporation must abide by, versus a for-profit business?
It is extremely confusing. The Non-Profit Mutual Benefit Corporation is a member-owned entity structure, which means that every patient who joins a collective becomes an owner, but only the directors are voting owners, and they actually manage the company. Patients are non-voting members. The non-profit status comes from the fact that these companies are non-stock issuing corporations. Therefore, no dividends can be distributed amongst the shareholders, which is compliant with the non-profit clause in Prop. 215 and also with the overall spirit of the collective.
Seeing as how the federal government does not recognize medical cannabis, why must collectives pay federal taxes? Why not just state and local taxes?
Thatâ€™s a very slippery argument, and I donâ€™t have a direct answer, but I can tell you thisâ€¦When these companies form in the state of California, they are domiciled in the federal union and, therefore, given a federal employee ID number. Even though we are protected in California by Proposition 215, we are still governed by federal corporate law. Overall, that is the best explanation.
In your opinion, should collectives be made, by law, to operate as non-profits?
From my experience, I kind of like that they do. It is in the spirit of what this industry is truly about. It is interesting, though, that Colorado does not require it.
Obviously, the biggest news in the medical cannabis community is the U.S. Attorneyâ€™s action to force all collectives to close, by threatening landowners with asset forfeiture and seizure by the federal government. How will this impact our local and state economy?
Hugely. The State Board of Equalization is probably extremely frightened right now, because they have already done their budget for fiscal year 2012, assuming that they would have all of this tax revenue coming in from collectives. They are probably scrambling around looking for other sources of revenue. Today, people simply cannot afford to have more money taken out of their paychecks, or to pay more property taxes. Beyond that, think of all the people employed by collectives. I would guess 5,000 to 10,000, either directly or indirectly in San Diego County alone. There is also a multiplier effect, when people become unemployed that affects all other businesses. That is a scary thought.
You mentioned that the State Board of Equalization would be harmed by the forced closure. Do you think they will speak up for medical cannabis collectives, even if it is just to serve their own interests?
Legally, constitutionally, it is set up that way. But whether they would actually do it â€“ I donâ€™t see it happening. Be it for political or social reasons, I just donâ€™t see it happening.
You have a lot of clients who will be affected by this. Are they panicking? Should they be?
Yeah, the ball is in the landownersâ€™ court right now. This has happened before in Los Angeles and there was no enforcement of forfeiture and seizure, but itâ€™s a different city and a different time. I have talked to clients whose landlords are willing to let them shut down and keep their lease option for three to six months, just to see what happens with this. Some landlords I know only rent to collectives because they know they can charge an arm and a leg. They have a huge vested interest in this. Itâ€™s their livelihood, their sole income, so they are willing to work with tenants. Other clients have received 30-day eviction notices. Some people are so anti-federal government that they will stay open as long as they possibly can, basically until they are too terrified to continue. These notices only state that the distribution and sale of cannabis has to stop. Those storefronts could stay open and teach grow classes and other activities. If there is going to be a lack of safe access, maybe they should start teaching patients how to grow their own medicine. Becoming a delivery service is also an option.
How will the forced shutdown affect you?
In the short term, I will be very busy with those who are shutting down. There are roles and responsibilities that a CPA has in the dissolve process. Anytime a business dissolves, it is a requirement that they file a final tax return. I will be busy at least through March 15, 2012. Those who decide to shift into a delivery service will still need my services, just not as in-depth. In the long term, I am going to focus on areas in this same niche, like hydro shops and patients/growers who are looking to legitimately report that income, but donâ€™t quite know how to do so. Iâ€™d also be willing to expand my practice outside of San Diego. I have already been to San Francisco and the shops there said there are no CPAâ€™s focusing on this industry up there. Arizona and Colorado are up-and-coming medical states, so there are definitely options out there. Right now, I just want to focus on helping my clients in San Diego get over this hump. 2012 will be a whole new adventure.
What advice do you have for the medical cannabis community, specifically collectives?
It is in our best interest to band together as one and ignore the competitive nature of the industry. Use the â€˜strength in numbersâ€™ rule. Itâ€™s a whole lot easier for a shark to go after one single fish than it is to go after a big ball of fish. If we band together, share a voice, and stand up for ourselves, it will have a bigger impact. The more unity, collectivity, and grassroot efforts we have, the better.
Has working in this industry been what you expected it to be? Any surprises?
I have learned a lot more than I thought I would. There are some very intelligent people in this industry; I have been extremely pleased every step of the way. Networking with so many attorneys, I have learned a lot about the legal issues of this field.
So you found the stereotypes placed upon this industry by the media and others not to be true?
Not entirely, no. There may be some people in it for all the wrong reasons, but for the most part, all are good people. So no, those stereotypes are not true.
Have you ever turned down work because you felt that a collective was not being operated correctly?
Yeah, a couple of times. You can tell in the first phone call the level of professionalism. Sometimes, just the tone of voice tells me that itâ€™s something I should avoid. I have to be careful about who I represent, because in a way, they represent me.
What are your personal views on medical cannabis and the full legalization of marijuana?
I have been a strong, strong supporter of medical cannabis for a long time; not only for its medicinal aspects, but also for its industrial aspects. I just feel that moving into a more natural, organic basis would help us extremely. As far as consumption, I am for this and over cigarettes, over alcohol, over all of the other substances out there. We have gotten such a bad rep, politically, ever since the days of â€˜Reefer Madnessâ€™ in the 1930s and 1940s. I am definitely a strong advocate for this medicine. I want it to become a social norm. Why it has been suppressed for so long, I do not know. I guess I just have an affinity for natural things. I rarely take Advil or Aspirin. Our pharmaceutical companies have way too much power.
Marioâ€™s committed passion for the cause, combined with his education and experience, makes him a praiseworthy member of the San Diego medical cannabis community. As we go to print, we do not yet know what the future holds, but with good people like Mario on our side, we will prevail.
835 5th Ave, Suite 309
San Diego, CA 92101