It’s no secret that the future is bright for the cannabis industry. According to Leafly, the US cannabis industry supports over 320,000 full-time jobs. That’s an impressive number considering the industry is still young by many standards. While this growth is exciting for entrepreneurs, there are still many federal regulations that make it challenging for dispensary owners to operate. One of these challenges includes paying your dispensary workers. So, how do dispensaries pay their employees? We created this guide to catch up on everything you need to know about dispensary payroll.
Banking Regulations
As mentioned in our Cannabis Banking Guide, new business owners often struggle to access the banks and financial services needed to open. This is due to the national legal classification of cannabis. So, how do you pay your employees when you’re dealing with cash transactions and no official bank accounts? We’ve outlined a few different methods that dispensaries use to help you answer this question.

Where to get help with dispensary payroll
Green Space Accounting has experience helping dispensaries with setting up and managing payroll for their employees. If you’d like more information on our services, you can read our service page about cannabis payroll solutions or contact us today— we’ll explain how Green Space Accounting can help.
How Do Dispensaries Pay Their Employees?
Cash Payments
A large number of dispensary operators choose to pay their staff in cash, although this can be dangerous and difficult for many reasons. It makes it harder for your accounting team to accurately file payroll and payout wages on time. Additionally, there could be tax implications from doing this, which would put more responsibilities onto your shoulders without any official documentation to support what you’re reporting back to the IRS. Paying your employees in cash can be a costly risk to take, so we highly advise against it.
Independent Contractors
An alternative to the “under-the-table” payment method is hiring workers as 1099 employees, which is a type of independent contractor. This allows for simpler accounting since the business only needs to send out one tax form at the end of the year instead of separate records for each pay period. However, there are downsides to this approach, including that you do not get unemployment insurance or worker’s compensation coverage when paying employees as an independent contractor. While having contractors is ultimately cheaper for the business, government and state agencies often frown upon this method. This is because, more often than not, dispensary employees like technicians and security guards do meet the criteria to be classified as contractors. It’s important to remember that your business could be hit with hefty fines and penalties if the IRS determines that you’ve been wrongfully treating your employees as contractors.
The Correct Way to Handle Dispensary Payroll
The best practice for paying your employees is no different than any other industry; they should receive regularly scheduled paychecks as they would at any other job. It’s critical you find a cannabis banking solutions partner that can make this possible. As an employer, you are legally required to pay your portion of employment taxes, file quarterly payroll returns, withhold taxes from employee wages, and so forth. While going this route is more expensive up front, it will save you from making costly mistakes later down the line should you run into compliance issues from paying in cash or under-the-table.

The Bottom Line
In short, managing the financial side of your business can be daunting, complicated, and confusing. The good news is, you don’t have to do it alone. At Green Space Accounting, we offer payroll solutions that meet your business’s needs and enable you to spend time doing what you do best – running your company. We will work with your team to identify and implement solutions to manage risk, improve performance, and put effective accounting and financial systems in place. Contact us today for a free consultation.

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