The past few weeks there has been one word on the mind of every medical marijuana farm, processor, and dispensary owner: Metrc.

The mandatory seed-to-sale software was intended to go live on April 30, but a class action lawsuit stopped the legislation in its tracks. Thousands of cannabis businesses support the new regulation, but thousands more are strongly against it.

Why the controversy? What is Metrc all about and how can we solve this pressing issue for our industry? After working with Metrc, we’ve got some insights and a few simple ideas for improvement.

What is Metrc?

Since the legalization of State Question 788 in 2018, the Oklahoma Medical Marijuana Authority (OMMA) has been looking for better ways to ensure accountability and safety throughout the industry.

In September 2020, after an extensive and thorough multi-bid process, OMMA awarded an exclusive contract to a company called Metrc to implement a seed-to-sale track-and-trace system across the state. Currently Metrc is being also used in 14 other states.

The new legislation requires all Oklahoma cannabis companies to purchase a monthly license for Metrc software as well as physical RFID tracking tags for all plants and products. Metrc can be used as a standalone solution or in conjunction with almost all third-party seed-to-sale, point of sale (POS), and inventory systems. Most seed-to-sales software cost between $200 and $600 per month, however OMMA was able to negotiate a $40/mo rate for all license holders.

Companies were given several months to get setup before the system went live on April 30, 2021; however, in mid-April, a class action lawsuit was filed against OMMA, attempting to halt the implementation of Metrc’s seed-to-sale software. The lawsuit is led by Ron Durbin, attorney for popular dispensary Dr. Z Leaf, and representing a large number of licensed businesses in the Oklahoma Medical Marijuana (MMJ) industry.

The state held a hearing, and on April 28, OMMA announced that they would delay the Metrc deadline from April 30 to June 30.

What is it like to use Metrc?

Most people opposing Metrc have never actually used it. I myself didn’t fully understand the true value Metrc would bring until we started the integration process and made our first sale. Here are my first impressions of the process:

• Plants are tagged and tracked from clones to finished product.
• Finished product is sent to a lab for testing, and once lab results are back, we attach the results to the batch and it becomes packaged with RFID tag and ready for sale.
• When the sales order is fulfilled and the licensed transport agent leaves the facility, we hit one button on our seed-to-sale software, and it pushes the order to Metrc. Once in Metrc, we release the tags to the dispensary or processor partner.
• The WHOLE process is transparent and visible to OMMA/Metrc in real time.
• Metrc software is not the most robust software, but its API integrates with almost all seed-to-sale software and has only added a couple steps to our process. At Rocking Star Farm, we use GrowFlow seed-to-sale, and it integrates perfectly with QuickBooks and Metrc. Critics say that Metrc doesn’t work with standalone seed-to-sale software, but this is simply not true.

What is the Metrc class action lawsuit all about?

Those opposed to the new system criticize the burden it places on Oklahoma businesses. Cannabis companies must purchase a monthly software license ($40/mo) as well as unique physical RFID tracking tags for all plants ($0.45/ea) and product packages ($0.25/ea).

System compliance doesn’t just represent new ongoing costs, but a significant investment of time and effort in setup and ongoing participation.

All software and tags in the state come from only one provider, Metrc, and those involved in the lawsuit claim that’s also an unfair monopoly.

Is Metrc good for the industry?

Many companies, including Rocking Star Farm, are in favor of the new Metrc system and the compliance objectives it represents.

We understand that the industry needs regulation. We need to weed out illegal black-market activity and unregulated products. These represent potentially dangerous products entering the market, and ultimately only hurt our state’s growing medicinal cannabis industry.

Is the new system perfect? Of course not. No legislation can entirely prevent illegal activity, but we believe that this is a great place to start. Metrc will allow OMMA access to unprecedented raw data points in the Oklahoma market. This will make it easier to spot red flags so OMMA can send agents to investigate for potential illegal activity.

Using Metrc isn’t just about compliance, it’s about safety as well. If there is ever an issue with a product, then product recalls can happen in real time. Currently, OMMA would need to physically go and review the dispensary and farm paper records in addition to issuing a mass recall. Metrc allows regulators to closely monitor the market for dangerous products and get them off the shelves before they ever reach a patient.

Any company that wants to legally participate in Oklahoma’s marijuana market should have no qualms about tracking, oversight, and regulation. These measures help keep patients safe, and keep legal local farms, processors, and dispensaries in business.

Solutions: should the state pay for Metrc directly?

The current class action lawsuit does raise some valid concerns. We agree that this is a huge financial burden to the industry and that businesses should be compensated. I personally appreciate the efforts of Durbin and others to reduce the cost burden on the medical marijuana industry. But how can this be done?

Some solutions for the Metrc cost concern would force the government to purchase the tags and distribute to the businesses in the industry. This is unlikely to pass, and in reality, it could lead to striking down the Metrc RFID integration all together.

If the state paid for the RFID tags out of tax revenue, a complicated licensing fee system would have to be designed to offset the variable cost of tags. How could a OMMA license for a small farm with a cost of $5k per year in RFID Tags, pay the same licensing fee as a larger farm with a cost of $60k per year? This system would also likely place a limit on the number of or sizes of farms, processors, and/or dispensaries.

Solutions: tax-deductible cost of compliance

Instead of having the state pay for Metrc tags directly, we think there is a simple solution: everyone in the industry should be able to write off 100% of “cost of compliance” from their Oklahoma Tax Commission tax liability.

Cost of compliance should include seed-to-sale software, point of sale software, Metrc, and RFID tags, banking fees, and licensing fees.

This passes the cost to the state without changing the entire law or opening up new restrictions on farms size or number of license holders.

Currently, dispensaries get almost NO tax deductions and can really only write off cost of goods sold—this is part of the 280-E IRS Rules. Grows and processors do have some tax write-offs, but not many. With this method, the state doesn’t have to give businesses anything, the state would simply allow businesses to keep more of the money they earn.

At the end of the day, implementing these measures would only earn the state more tax revenue. Every illegal black-market transaction is a lost opportunity for 7% MMJ tax, 8% state sales tax, city/county sales tax; and state business/personal income taxes. Oklahoma earns ZERO dollars from black-market and out of state product funneling into our state!

Solutions: cannabis banking (with tax-deductible fees)

If OMMA and the State of Oklahoma wants to have full compliance and regulation of the industry, then they also need to give an incentive for MMJ businesses to have banking. Compliance should include cannabis banking for true transparency and industry business owner safety.

Banking in our industry costs $1000 per month because of the auditing and cost the bank incurs to make sure it is compliant (mostly because this is still federally illegal). If these fees were deductible, then more businesses would use banking. Banking is crucial to make sure businesses are fully compliant, and it also helps companies move away from the unsafe cash business.

Here at Rocking Star Farm, we use Regent Bank which connects to a company called GreenCheck, both connect to my QuickBooks and seed-to-sale software and Metrc. This is how Regent bank can see that our invoices in seed-to-sale match with QuickBooks invoices, which are also verified through GreenCheck to match the deposits at the Bank.

This is true transparency and what OMMA needs to make sure people are lawful. Encouraging banking (with tax-deductible fees) will increase compliance, capture more tax revenue, and keep more money in our strong local MMJ market.

Final thoughts

At the end of the day, our industry needs more regulation and better transparency. These measures can only protect patients and local legal businesses.

We believe Metrc is a promising start to a state-wide track-and-trace system, but like any legislation, there is still room for improvement. If lawmakers want to support our industry and encourage compliance, they need to make a few simple changes like allowing cannabis businesses to deduct cost of compliance.

We agree with Attorney Ron Durbin 100%, that the only real way to fully weed out illegal activity and black-market sales is with boots on the ground and a large number of OMMA law enforcement officers.

We’re pro cannabis, pro Oklahoma, pro OMMA, and pro Metrc. This fight for regulation is for the little guys like me who spend a fortune to be 100% compliant and who are losing revenue to people who don’t. This fight is also for the dispensaries with little to no tax deductions who need a lower tax burden to stay competitive with the black market. Together, we can keep our industry strong, safe and growing. Let’s make this work.