Dispensary Jobs and Compensation Expectations in the Medical Marijuana Industry
If you're looking to get started in the medical marijuana industry but don't how much you can expect to earn, here's a quick overview of compensation expectations for dispensary owners, budtenders, growers, and other dispensary jobs in the medical marijuana industry.
Setting Salaries and Compensation Structures for Your Medical Marijuana Collective
Considering the fact that all medical marijuana operations in California must more formed as a non-profit entity, it is imperative that the members of the collective be paid in a manner that is similar to other non-profits in the state. Like other non-profits, the IRS expects all members of the organization to be allotted a “reasonable compensation” for the work they do for the organization. We’ll dig deeper into what exactly this means in the next section.
Starting a medical marijuana business, grow operatio, delivery servie, or dispensary? Check out our online courses! Our courses are in depth, up-to-date and will tell you everything you need to know to get started.
“Reasonable Compensation” As Defined By The Internal Revenue Service
The following text was taken from the IRS’ websites and should give you a better understanding of how they view and define “reasonable compensation.” As you can see from the last sentence, reasonableness cannot be determined in advance so you should always use your best judgment.
“Reasonable compensation is defined by Reg. 1.162-7(b)(3) as the amount that would ordinarily be paid for like services by like organizations in like circumstances. Thus, the concept has two prongs: 1) an amount test, focusing on the reasonableness of the total amount paid; and 2) a purpose test, examining the services for which the compensation was paid. These two prongs are not separate issues, focusing on different facts. Rather, the various factors in a particular situation taken together determine whether either or both of the tests is satisfied. For example, assume that the president and founder of an IRC 501(c)(3) private foundation receives a $40,000 annual salary from the foundation. There was no arm's length bargaining to determine the salary. The president works approximately 40 hours per week, and has extensive administrative and managerial duties. All of these facts will be part of an analysis of whether the amount paid is reasonable and whether it was paid to enable the organization to carry out its exempt purposes.
Determining “Reasonable Compensation” For Your Organization
As you learned in the previous section, the best way to establish compensation for your medical marijuana collective is to:
Compare similar pay rates of similar positions in similar industries
Take into consideration the type of job, level of education of the employee, and hours worked
- If a budtender, determine what a reasonable budtender salary would be for dispensary jobs of various sorts.
At the end of the day, it’s up to you to determine what you (and the IRS) think is “reasonable compensation” for employees and operators of the collective. Whatever route you choose to take, make sure that the Board of Directors documents (and explains reasoning for) anything related to compensation. Of course, once marijuana is legalized in the state, compensation restrictions will likely be lifted because organizations selling marijuana will almost certainly be able to form as a for-profit enterprise.
In addition, if you're an employee having employment issues with your company, this employment law attorney like to the ones at HKM can help handle all the legal aspects of your employment issues!