The cannabis industry has experienced explosive growth over the past decade, yet it still operates in a legal gray area due to federal prohibition. This presents unique challenges for dispensary owners, particularly when it comes to payroll. So, how do dispensaries pay their employees in an industry that's legal at the state level but not federally recognized?
Here is what businesses should know about one of the most common questions regarding cannabis payroll:
How Do Cannabis Dispensaries Pay Their Employees?
Understanding how cannabis dispensaries pay their employees goes beyond just delivering paychecks. Cannabis business leaders need to understand much more if they want to see smooth operations, keep employees satisfied and engaged, as well as avoid legal trouble.
This article will dive into the following questions regarding how dispensaries pay their employees:
- How Do Dispensaries Pay Their Employees?
- How Much Do Dispensaries Pay?
- Can Dispensaries Use Banks?
- How Do Dispensaries Pay Federal Taxes?
How Do Dispensaries Run Payroll?
Despite the complexities, most dispensaries pay their employees just like any other business—through regular payroll systems with checks or direct deposits.
However, behind the scenes, cannabis payroll is anything but typical. When it comes to processing payroll in the cannabis industry, payroll and HR managers need to account for:
- Limited access to traditional banks
- Increased IRS scrutiny due to IRS Code 280E
- High cash handling due to limited financial services
Some dispensaries have been forced, or rather, may feel forced to pay employees in cash, particularly in states or regions with limited cannabis-friendly banking options. However, this creates safety risks and compliance issues.
To mitigate these risks, many cannabis businesses now work with specialized cannabis payroll companies or credit unions that offer services to the cannabis sector.
How Much Do Dispensaries Pay?
Not only is it important to understand HOW dispensaries pay employees, but also how much. The job market has become quite competitive in recent years, and the cannabis industry is no exception. Ensuring that your compensation packages are competitive with what your competitors are offering is important for hiring cannabis employees.
While compensation in the cannabis industry, perhaps more than in other industries, can depend on location, experience, company size, and state labor laws, here are some general salary ranges (based on current market data):
Position |
Average Hourly Pay |
| Budtender | $14–$18/hour |
| Dispensary Manager | $20–$30/hour |
| Inventory Specialist | $16–$22/hour |
| Compliance Officer | $25–$35/hour |
Some dispensaries also offer bonuses, sales commissions, and employee discounts—especially in competitive retail markets.
Can Dispensaries Use Banks?
This is one of the most pressing questions for cannabis business owners: Can dispensaries use banks?
The answer is technically yes—but with challenging limitations, and limited options.
Most large, federally insured banks avoid cannabis clients due to federal regulations. However, some state-chartered banks and credit unions do provide banking services to dispensaries, albeit with:
- High fees
- Limited service scope
- Intense compliance requirements (frequent audits, reporting)
According to recent data, only a small fraction of financial institutions in the U.S. currently serve cannabis businesses (~10%). That means dispensaries must carefully vet financial partners. However, that doesn't mean dispensaries are alone in doing so. The best cannabis payroll companies maintain cannabis banking relationships to make your search easier.
Dispensaries should look for a provider who provides reporting and monitoring tools that allow CRBs to identify, monitor, and report on transactions and events that are required to ensure compliance and transparency. This proactive monitoring and maintenance of compliance data can also enhance a your position with investors, banks, and government agencies.
How Do Dispensaries Pay Federal Taxes?
This is where things get tricky. Although cannabis is legal in many states, it remains a Schedule I substance federally, which invokes IRS Code Section 280E.
Things to consider when it comes to federal taxes include:
- Dispensaries cannot deduct most business expenses (e.g., rent, marketing, employee benefits) when filing federal taxes
- They can only deduct Cost of Goods Sold (COGS), which includes expenses directly tied to product acquisition or production
- The impact of IRS Code Section 280E often results in significantly higher tax burdens than non-cannabis businesses
Dispensaries must file federal taxes like any other company (typically using Form 1120 for corporations), but they must be extremely cautious and thorough in their reporting. Dispensaries should look for a payroll partner that can help them track allowable labor-related expenses under Section 280E within cost centers while also providing a complete audit history of labor expenses, including both 280E applicable and non-280E applicable expenses.
Proper tracking can create a fully transparent labor expense record designed to support accurate accounting for allowable Cost-of-Goods-Sold (COGS) deductions along with all labor expenses incurred.
Get Help with Cannabis Dispensary Payroll
Whether you're running a single dispensary or a multi-state cannabis operation, staying compliant with payroll laws is critical. Consider working with a payroll provider that specializes in cannabis and understands the unique financial and legal landscape, but don't settle for just any cannabis-compatiable provider. There are many reasons to switch cannabis payroll companies, even if your current one services the industry.
To learn more about how Evolve HCM can help with payroll for dispensaries, contact us today.
