The 3 Regulation Reporting Databases Explained

by Mike Coner

Every dispensary needs to capture and report data on 3 business processes.

It should come as no surprise that the cannabis industry in every state is subject to tight regulations. These regulations play an important role in ensuring that Cannabis doesn’t make its way into the wrong hands, leave the state, or become contaminated.

For a legitimate nationwide cannabis industry to become a reality, dispensaries must be capable of meeting regulators’ needs while producing enough revenue to become profitable. Wherever there is regulation, there will be a black market, and the key to drafting good legislation is finding the appropriate balance between compliance and profitability.

Cannabis entrepreneurs need to work within the framework of the state they wish to do business in. For now, that means establishing compliant processes and generating reports on the three major databases in cannabis compliance:

  • Seed-to-Sale
  • Point-of-Sale (POS)
  • Revenue and Taxation

We’re going to cover exactly how each of these fits into the bigger compliance picture and what dispensary owners can do to make reporting to these databases easier. Without process automation, compliance is a thankless and time-consuming task that comes at a high opportunity cost.

  1. Seed-to-Sale

Seed-to-sale reporting refers to the plant-tracking system states use to correlate every single sale of a cannabis-based product to a single plant, registered with one of the state’s licensed cultivators. The seed-to-sale database gives state authorities the ability to oversee, manage, and enforce cannabis compliance throughout the industry.

Major names like Microsoft and Oracle have contributed technology to these databases. Typically, the seed-to-sale reporting system relies on RFID barcodes and scanners to generate an audit trail. If state regulators want to see where a certain cannabis product originated from, they simply ask the dispensary owner to show the path the product took – from cultivation, through processing and extractions, to packaging and distribution to a retailer and onto the sales shelf.

Seed-to-sale databases need to be secure in order to prevent unauthorized individuals from introducing or altering records. State authorities put a great deal of effort into developing security partnerships that ensure seed-to-sale records can’t be changed, and some even use advanced biometrics to keep data secure.

Dispensaries need to collect and report this data in every state where cannabis is legal for medical or recreational consumption. While manually reporting data is a slow but effective solution for dispensaries with low sales volume, it quickly becomes unmanageable when dispensaries reach modest daily sales figures.

  1. Point-of-Sale (POS)

Point-of-Sale reporting refers to patient and customer data that requires processing to fulfill the basic requirements of running a retail business. It includes inventory management and payment information, helping generate a complete picture of how the dispensary meets orders and whether it is diverting cannabis products to the black market.

The point-of-sale database is also crucial for gathering insight into customer and patient behaviors. Automated point-of-sale software can generate real-time reports that reflect sales trends and customer data in a way that manual data entry can only do after the fact.

In the cannabis industry, point-of-sale systems that integrate with seed-to-sale systems through API plug-ins offer greater functionality and more streamlined compliance than regular retail systems. Because cannabis dispensaries must report every individual sale to state regulators, the ability to generate that report by swiping the product barcode (and simultaneously fill out the seed-to-sale report in the process) is invaluable.

taxation-regulation
  1. Taxation and Revenue

The third crucial reporting database for cannabis entrepreneurs is the financial database. This is where dispensary owners report all revenue from in store and non-retail sales to determine how much they owe in taxes – both to the federal government and to city, state and county depending on retail store locations.

The laws surrounding cannabis taxes are unique thanks to the pharmaceutical commodity’s status as a federally scheduled substance that is nonetheless legal at the state and local level. Without process automation operating the dispensary tax database, dispensary owners need to guess their tax liabilities or hire an experienced CPA full-time.

In a highly regulated industry like this one, there is no room for guesswork – especially when it comes to taxes. Process automation can give dispensary owners peace of mind when filling out their taxes by automatically calculating tax liabilities according to industry-specific formulas.

One of the best-known examples of the cannabis industry’s unique tax environment is US Code Section 280e. This law prohibits cannabis entrepreneurs from enjoying federal tax reductions – although there are narrow exceptions for the “costs of goods sold,” but claiming those deductions requires precise recordkeeping.

How Dispensaries Can Automate Report Generation

In other highly regulated sectors like the pharmaceutical, alcohol, or firearms industries, report generation is often automated. The development of purpose-built, industry-specific supply chain, point-of-sale, and accounting software is crucial to the success of many businesses in these industries. In this respect, the cannabis industry is no different.

Dispensary owners who have experience working in highly regulated industries know the value that intelligent systems can offer to those organizations. These cannabis professionals are looking for complete technological solutions that can simplify the collection and reporting of data to each of the three main databases that cannabis organizations must maintain with unerring accuracy.

EzGreen gives cannabis cultivators, processors, and dispensaries the ability to automate the most time-consuming elements of compliance. It empowers growers, concentrate extractors, and budtenders to minimize the amount of time and effort that goes into keeping well-maintained records while ensuring government authorities are always in the loop.

By capturing patient/customer data at the point-of-sale and integrating with state-mandated seed-to-sale systems, ezGreen streamlines compliance for cannabis dispensaries It also maintains compliance with both City and State guidelines for its users by reporting and storing financial information through certified formularies.

Sources:

https://www.investopedia.com/articles/economics/12/mechanics-black-market.asp

https://www.intelligenteconomist.com/opportunity-cost/

https://www.forbes.com/sites/theyec/2018/07/24/what-cannabis-entrepreneurs-should-know-about-tax-section-280e/#2d6c0cb97377

https://www.irms360.com/expertise/healthcare/pharmaceutical

https://www.law.cornell.edu/uscode/text/26/280E

https://www.huffpost.com/entry/how-seed-to-sale-systems-are-revolutionizing-the-cannabis_b_59724910e4b06b511b02c312

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