Colorado federal defense attorney Doug Richards talks about the “red flags” that the IRS looks for in their search for marijuana dispensaries, such as a business that deals exclusively in cash.

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Besides working in a business that is inherently illegal–patently illegal–because you’re dealing with drugs that are banned substances, one of the things that the IRS looks at and is a red flag to them is that you’re a cash business. Marijuana dispensaries are a cash business, and that immediately puts you on the front lines as far as their audits are concerned. They are going to be watching you closer than they would watch anyone else because they’re expecting structuring, racketeering, and all these sorts of federal money laundering crimes to be taking place behind your doors.