Colorado’s cannabis dispensaries could get a long-awaited tax break and easier access to traditional banking services expedited by President Donald Trump’s executive order last month. Shop owners say they’ll believe it when they see it.

“We’re just kind of waiting to see how everything shakes out,” said Parker White, manager at the Rocky Road recreational dispensary in Vail. 

Colorado is one of 24 states in the U.S. that allows recreational marijuana use and one of 40 states that allows for the medical use of cannabis, according to the National Conference of State Legislatures. Still, local sellers in Colorado’s mountain towns are left facing restrictions due to the federal regulation and classification of marijuana products.

Trump signed an executive order on Dec. 18 directing the U.S. Attorney General to expedite the ongoing process of reclassifying marijuana from a Schedule I to a Schedule III substance — an effort that originally began under the Biden administration in 2022.

Under the Controlled Substances Act, a Schedule I substance is classified as having “no accepted medical use” and a “high potential for abuse,” according to the Drug Enforcement Administration. Other Schedule I drugs grouped in with marijuana include heroin and LSD.

Once reclassified to a Schedule III substance, marijuana would belong in the same category as some prescription painkillers like Tylenol for its “accepted medical uses” and “lower potential for abuse,” relieving sellers of restrictive tax burdens and improving investor access.

The executive order itself does not immediately reclassify marijuana; rather, it instructs the U.S. attorney general to “take all necessary steps to complete the rulemaking process” as soon as possible, though the process is expected to take much of 2026 or longer to fully materialize due to the required public comment periods and potential administrative hearings. The reclassification also doesn’t legalize marijuana at the federal level or change criminal penalties.

Marijuana has been legal for recreational use in Colorado since 2012, becoming a major staple of the state’s economy. Since sales began in 2014, they have exceeded $16.9 billion, though sales in 2024 fell 9.6% year-over-year thanks in part to its widespread legalization and a decrease in post-pandemic demand, according to the University of Colorado’s Leeds School of Business 2026 economic outlook report.

One of the most immediate and notable impacts of the reclassification would be the elimination of the Section 280E federal tax penalty on cannabis shops, which only apply to those selling Schedule I controlled substances. The penalty has prevented cannabis businesses in Colorado from deducting ordinary operating expenses like payroll, utilities and rent from their taxes, a notable financial burden for local shop owners. 

Smaller mountain-town retailers, which often operate on thinner margins than chain stores or local businesses in larger cities, would especially benefit from the lowered effective tax rates and increased cash flow. Andrew Wickes, owner of The Snowmass Dispensary in Snowmass Village, said his store doesn’t typically make money in offseason months, during which it still owes income taxes.

“It’s really a huge numbers game. Some of the larger companies that might be in the multi-millions of dollars of revenues, they’re able to make it,” Wickes said. “The small businesses have had a really hard time because that taxation aspect will really just whack you.”

The Snowmass Dispensary is a locally owned recreational cannabis store with four full-time and two part-time employees. Instead of hiring more positions, Wickes said he and his wife have had to handle much of the bookkeeping, marketing and management responsibilities on their own in order to stay profitable as a business.

“As a business owner, it would be great to be able to be taxed like a normal business. I would love to be able to help pay insurance for employees and have that be a deductible expense,” Wickes said. “If you want to take on paying insurance for your employees and you don’t have the deductibility … it makes it really difficult to maneuver in some of those things that make you a well rounded employer.”

When combining federal, state and payroll obligations, the average total tax rate for small businesses in the U.S. is typically between 20% and 30% of net income, according to USA Tax Gurus, with exact rates depending on location and business structure.

Wickes claims his store’s tax rate is closer to 60%.

“It might be different if you’re completely focused on production, but I think for a lot of people that are at the retail component of cannabis, your effective tax rate is probably closer to 60%,” Wickes said.

White said the ability to claim deductions would help “somewhat” in terms of taxes, but he added that larger issues still remain within the industry. For one, he said, the industry is overtaxed at the local level. Another issue is the insufficient regulation of hemp products in the market.

“They’ve done a good job of trying to restrict synthetic hemp products, but I think that market has also impacted the recreational market quite a bit over the last few years, because there’s more competition and products available online that really shouldn’t be available, that aren’t safe and aren’t tested to the same standards that the legal industries are,” White said.

The transition to a Schedule III substance might make banks and investors more willing to work with cannabis businesses thanks to a lower risk profile, potentially opening to doors to better opportunities for loans and other banking services. Wickes said the Schedule I classification has created “some really large obstacles” to accessing normal banking.

“There’s an Alpine Bank about 50 feet from here. It’d be nice to possibly be able to work with them one day,” Wickes said.

Dispensaries cannot traditionally process credit cards, even in states where cannabis is legal for recreational or medical uses. Additionally, since several major credit card networks and banks like Visa, Mastercard and American Express operate under federal law, transactions are prohibited for what the federal government still classifies as an illegal Schedule I controlled substance.

White said cannabis businesses can also be denied loans for mortgages or business loans, especially when dealing with larger banks.

Reclassifying marijuana to a lower-risk substance wouldn’t automatically make credit card usage legal for dispensaries, due to the substance remaining illegal at the federal level, but the change could loosen the landscape over time.

“There’s not enough access to banking and easy payments,” White said. “Being able to take credit cards as an industry would be huge.”

Trump’s executive order expedites the already ongoing process of marijuana reclassification, but he was not the first to initiate the federal government’s formal order. The process originally began under former President Joe Biden in 2022, when he directed the health and justice departments to conduct a review of marijuana’s federal classification. The review led to a formal recommendation by the Department of Health and Human Services to reclassify the substance to Schedule III, after which the Drug Enforcement Administration published a formal notice of proposed rulemaking for the change in 2024.

Delays caused by procedural issues and administrative hearings quickly stalled the reclassification, where it largely stayed throughout 2025. Although Trump’s executive order is reigniting hopes that the process will pick up again, Wickes said he’s not holding his breath.

“Even comparatively as someone who’s newer in the industry, rescheduling was always something to be pondered and considered, but any time there seemed to be a little movement in that front, it never seemed to take any hold,” Wickes said. “There’s been many times in the past where (the cannabis industry) has gotten excited about it, but various interagency complications and so forth have obviously continued to delay that.”

Talks about better banking access for cannabis businesses have been ongoing for even longer, with little to no reform.

“They’ve been talking about banking reform since Colorado legalized it. I’ve been in this industry for over a decade now, and I think that’s everybody’s feelings. We’ll believe it when we see it,” White said.

On the bright side, the reclassification of marijuana is expected to make it easier to conduct research, develop medical products and support more cannabis-derived treatments for an already-struggling medical cannabis market.

White said Rocky Road, which has two other dispensary locations on the Front Range, used to have additional locations specializing in medical cannabis, which the owners decided to close due to the struggling market.

“I think the Colorado legislature hasn’t done a good job of maintaining the (medical marijuana) industry. They’ve pretty much crushed it, I think, by over regulation,” White said. “I don’t know a lot of med stores that are making a lot of money right now.”

While businesses agree that saving on taxes is a good thing, Wickes worries the cannabis market’s competitive nature could lead to consolidations. The recent statewide drop in revenue and sales from marijuana has driven up competition within the industry, meaning some might decide to drop their prices once their tax rates go down in an effort to attract more customers.

“One thing I worry about is that this business has always been sort of a ‘race to the bottom’ business,” Wickes said. “If everyone maybe does 20% to 30% better on their taxes, how many businesses or retailers that are in really competitive environments aren’t just going to try and drop their prices right off the bat 20% to 30% to earn market share? (That) would just put the entire industry back in the same place.”

Marijuana prices have already seen notable drops since before the pandemic, particularly due to market oversupply and increased competition.

“I would hope that the Colorado market in general would see the predicaments that have been in front of them for the longest time and not rush to do that,” Wickes said. “Loosening that tax burden would allow you to reinvest a little bit in employees and other normal business activities, which would be great.”

“I hope the Schedule III thing helps the Colorado industry, but I feel like it’s going to take more than that,” White said.