December 14, 2016 3 min read

Opinions expressed by Entrepreneur contributors are their own.

Microsoft has quietly entered into the cannabis business, partnering with a California software company to offer governments a system that tracks marijuana sales and compliance issues.

The partnership combines Los Angeles-based Kind Financial’s software for tracking production and sales of cannabis with Microsoft’s Azure Government Cloud. The goal is to contract with local and state governments where marijuana is legal, providing officials with a simplified way to keep track of tax payments and cannabis production.

Teaming up with Kind made sense for Microsoft, according to Kimberly Nelson, executive director of state and local government solutions for Microsoft. In a statement, she said Kind will utilize the Azure Government cloud, which she called “the only cloud platform designed to meet government standards for the closely regulated cannabis compliance programs.”

Related: Steve Wozniak Offers 4 Pieces of Advice for First-Time Entrepreneurs

Government challenges regulating legal marijuana.

Government agencies at the state and local level face a complex task with marijuana regulation and tax collection. Not only is the legal marijuana business relatively new, but cannabis remains an illegal drug under the federal Controlled Substance Act. This means few financial institutions will make loans or handle business transactions for marijuana-related companies.

Because of this, many cannabis retailers work in cash-only transactions. Some install ATM machines on their property to make it convenient for customers. In this environment, Kind Financial offers its software system to track production and sales, both for private retailers and government agencies.

Related: Richard Branson: How to Spot an Opportunity

Kind’s Agrisoft

Called Agrisoft Seed to Sale, the Kind Financial software allows companies and government agencies to track costs from the production stages of marijuana to the sale of the product in dispensaries. The software also ensures operations comply with government regulations. The software creates “100 percent accountability and transparency for all levels of your organization and through to the government,” according to the Kind Financial site.

For government officials, the software allows them to track all licensed marijuana growers and sellers, ensuring a company doesn’t produce marijuana that disappears into the black market to avoid taxation.

Kind Financial began in 2013 as a company geared toward providing financial, technological and marketing services to the growing marijuana industry. The company was founded by David Dinenberg, the former COO of Grasso Holdings, a real estate development company.

Related: 5 Reasons Businesses Shouldn't Keep Ignoring Content Marketing

Partnership with Microsoft

Microsoft entered into a partnership with Kind on the government side of the business. The tech giant plans to include the software in the suite of services it offers governments through the Microsoft Azure Government Cloud.

The cloud’s offerings include infrastructure, platform and software services. Microsoft partners with a number of software development companies to offer a full suite of services to both private and public entities. For Kind, the partnership is a step toward reaching a wider range of potential clients. Microsoft’s team will help the company make bids for government contracts. The demand, said Dingenberg, will always be present.

“No one can predict the future of cannabis legalization, however, it is clear that legalized cannabis will always be subject to strict oversight and regulations similar to alcohol and tobacco;” Dinenberg said in a prepared statement.