An employee withholding has to be paid electronically, otherwise a 10% penalty is applied. That puts marijuana businesses in a very bad situation, as most banks will not work with marijuana businesses. This situation almost automatically results in a penalty for most marijuana businesses, which is obviously unfair. A medical marijuana dispensary in Denver challenged the provision, and the IRS has agreed to refund the $25,000 in penalties that the business had received. Per The Cannabist : \n The Internal Revenue Service has backed away from a policy that penalized an unbanked marijuana business in Denver for paying taxes in cash, but the federal agency will not say if the approach applies industry-wide. \n In a settlement with Denver-based Allgreens, a medical-marijuana dispensary that challenged the agency over its policy, the IRS said it would abate future penalties and will refund about $25,000 of fines the business was forced to pay despite having paid its federal employment withholding on time. \n This is either going to be a very significant change in direction by the IRS, or it could just be an isolated case, no one knows for sure at this time. However, if the IRS doesn’t apply the rules to everyone equally, it could lead to equal protection lawsuits. Marijuana businesses have it hard enough with 280e issues, banking problems, and constant attacks from politicians. Penalizing them even further because they pay their tax bills in cash is ridiculous. Yet somehow the industry continues to succeed. Imagine what will happen if/when the industry gets to operate on an even playing field with other industries.