“Here’s the first one,” Elliott Klug said as he reached into a soft-sided briefcase and handed over a tax document and manila envelope filled with more than $3,000 in cash. Klug stood in front of the counter facing a Colorado official to pay taxes for Pink House, the chain of marijuana stores he founded.
Despite his laid-back appearance, with a straggly ponytail and mutton-chops beard, his money was neatly bundled into stacks of one or two thousand each, sorted by denomination, all bills facing the same way. “I guess I’m OCD or something,” he said with a chuckle. Klug had trained his staff to organize the money that way to force precision. “I hated going somewhere and finding out I was $20 short,” he explained.
Today is the deadline for tax filings based on January sales, the first month in which approved retailers could sell pot for recreational use. Klug’s colleague had already paid Pink House’s Denver city taxes, so he was just delivering the state portion: 2.9 percent sales tax on medical marijuana and 12.9 percent sales tax on recreational pot. Colorado Gov. John Hickenlooper’s new revised budget expects marijuana taxes to total $98 million a year, about 40 percent more than the initial estimate of $70 million.
Klug was handing over thousands of dollars in hard currency because, like most marijuana entrepreneurs, he’s stuck running his business largely in cash. Most banks, even after getting tacit approval from the federal government, won’t take pot clients, even from businesses legally operating under state law. A number of companies have managed to maintain bank accounts. Some operate with full knowledge of the bank; others, like Klug, fly under the radar. But because he can only deposit so much in each account without setting off warning signals, he reserves the bank funds largely for payroll. Almost everything else, including rent and taxes, he pays in cash.
Klug drove to the state tax office in a Honda Element emblazoned with his bubble-gum company logo and Statue of Liberty cartoons, a handgun next to the driver’s seat for protection. As he circled the parking lot looking for a spot, a man stepped up to the car and pulled his long, black coat aside to reveal a badge on his waist. The Department of Revenue official told Klug to park directly in front of the building in a no-parking zone.
“Hi, I’m Robert,” the man said, shaking Klug’s hand and cracking a joke about how unexpected it must be to get protection from the state. He ushered the marijuana merchant inside the building, where a uniformed guard took over escort duties all the way back to Window 1. “From now on,” the guard told Klug, “it will always be Window 1.”
Janice, the smiling clerk with teal eye shadow working inside the window, greeted Klug and got to work. She and a colleague counted his cash—sometimes in an automatic counter, sometimes by hand—and checked the larger bills for counterfeits with a special pen. Janice stamped the form and gave Klug a receipt, then process repeated with a new tax document and envelope for his next Pink House location. “Last one for this round,” Klug finally told Janice, handing over the last envelope. She shook out the cash and a few coins jingled out on the desk.
In the nearly 15-minute span while Klug paid his taxes, the guard escorted two other people into the room to wait for marijuana tax window. The first man, in a baseball cap and sunglasses, had a large brown valise that caught Klug’s eye. Another man, in shorts, had two binders with him and no large bag. “He must have checks,” Klug surmised.
