Within the prior post on this collection, we mentioned U.S. federal and state taxation necessities for worldwide hashish corporations. This publish focuses on when a international firm ought to or should register as doing enterprise in a U.S. state, both by registering their international firm straight in that state or by forming an affiliate or subsidiary firm in that state.

Apart from registration with the U.S. Inside Income Service (“IRS”) to satisfy U.S. tax obligations, there isn’t any federal enterprise registration within the U.S. as a result of registration is finished on the state degree. The standards for whether or not it is advisable register in a U.S. state relies on the legal guidelines of every state relating to when a enterprise is taken into account to be “doing enterprise” in that state. This dedication is impartial from whether or not you owe revenue tax or one other tax based mostly in your U.S. gross sales in a state.

As an example, in Washington, California, and New Jersey, solely promoting product by way of a dealer or sustaining a checking account at a monetary establishment is just not sufficient to require registration in these states. However doing something greater than sustaining a checking account, promoting product by way of a dealer, or doing different minimal enterprise actions requires registration in these states:

State Registration Required Feedback
Washington (WA) Sure If leasing warehouse house, storing product, or repackaging product in WA
California (CA) Sure If leasing warehouse house, storing product, or repackaging product in CA
New Jersey (NJ) Sure If leasing warehouse house, storing product, or repackaging product in NJ

Every worldwide hashish firm might want to analyze every a part of their U.S. operations to find out whether or not they should register to do enterprise in any states.

If, for instance, you leased warehouse house and saved all your west coast product in Washington and shipped it into California after the sale, then you wouldn’t must register in California. The reverse would even be true in the event you saved all your west coast product in California and shipped to Washington.

However in the event you would wish to retool your CA and WA logistics to make this occur, that will most likely price you extra in the long term (through delivery delays and different points) than going forward and registering in every state the place you lease warehouse house or retailer product.

Usually the standards {that a} state’s taxation bureau applies relating to your revenue and gross sales tax obligations is totally different than the standards that’s utilized by its division of commerce or secretary of state relating to whether or not the enterprise must be registered.

The price for preliminary state registration varies from USD $100-$300, and annual compliance with every state varies from just a few hundred {dollars} to tends of hundreds of {dollars}. The latter excessive expense can occur in Delaware, so be very cautious when establishing a Delaware entity so you may make sure you decrease your annual franchise tax cost.

Usually, nonpayment of taxes is considerably extra severe than nonregistration of a enterprise entity as a consequence of excessive penalties that may and will likely be assessed in opposition to enterprise house owners (not simply in opposition to the nonpaying companies), however you will need to adjust to each registration and taxation necessities.

Lastly, I must flag the problem of U.S. immigration for non-U.S. residents who’re by some means concerned or fascinated with getting concerned in a U.S. marijuana enterprise, whether or not from their dwelling nation or while you’re within the U.S. My colleague Akshat Divatia wrote a cautionary blog post discussing how involvement may trigger international people to have important issues with USCIS (U.S. Citizenship and Immigration Companies) and USCBP (U.S. Customs and Border Safety). In that publish, Akshat wrote:

Even a international nationwide who has by no means consumed marijuana may very well be declared inadmissible beneath the INA [Immigration and Nationality Act] based mostly on his or her involvement in a [U.S.] authorized hashish [marijuana] enterprise, both as ‘a realizing aider, abettor, assister, conspirator, or colluder with others’ or ‘a bootleg trafficker’ of a managed substance.

In brief, in case you are a non-U.S. citizen and assume you wish to become involved in any manner in a state-legal U.S marijuana enterprise, and if in case you have any plans on coming into the U.S., it’s best to seek the advice of with an immigration lawyer earlier than you come to the U.S.