Mendocino County BOE representative studying Colorado marijuana regulations
Fiona Ma, the District 2 California State Board of Equalization member, and local representative of Mendocino County, led a fact-finding tour to Colorado last week to study Colorado’s effort to establish a comprehensive regulatory and taxation system for cannabis.
The tour included meeting with government agencies like the Office of Marijuana Coordination, banks, tours of grow operations, manufactures of cannabis-infused products and live demonstrations of tracking systems used to record, report and enforce Colorado restrictions on transportation and distribution of cannabis in-state.
“California has its work cut out for it,” Ma stated. “Based on the sheer scale and numbers involved with our current medicinal cannabis industry, it is clear that regardless of what other states are doing, California will be a game changer.”
In 2014, California collected $44 million in sales taxes from only 25 percent of the medical cannabis dispensaries that have active operations in the state, according to Ma’s office.
Ma and the Board of Equalization, which already collects sales and use taxes for voter-approved medicinal cannabis operations in California, has been focusing closely on the existing industry and preparing for possible legalization of recreational use of cannabis in California in 2016.
Due to conflicting federal law, cannabis operations are virtually excluded from accessing banking services, meaning dispensaries are strictly-cash operations, according to Ma. With banks reluctant to take on the risk and responsibilities associated with accepting money earned from a substance that’s still illegal under federal law, banking has become a rare and/or very costly luxury in the marijuana industry.
This cash-based system makes auditing and assessing the gross receipts of cannabis operations exceedingly difficult from a tax-collection standpoint, and means that the owners and operators of medicinal cannabis operations face a number of challenges – the biggest being public safety risks. Any business that has cash money on its premises runs a risk of becoming a target of theft.
Though Colorado has not yet reported any violent crimes associated with its cannabis industry, according to Ma, this may be in large part due to access to resources like safe transport and banking within the industry.
While Colorado reports that about 75 percent of its cannabis industry has access to some sort of bank account, in California it is estimated that only 10 percent of the cannabis industry has access to banking, according to Ma.
Additional challenges include meeting payroll obligations for employees who often are paid in cash, as well as tax payments to their state and the federal government.
“Keeping an industry and our citizens from fully integrating into our tax system and our financial infrastructure is a lose-lose proposition,” Ma stated. “It makes no sense to allow industries the flexibility to set up shop, but not have access to the most basic of necessities like a bank account. This frustrating situation is forcing states to no longer ask permission, but instead, do whatever they can get away with within their legal rights.”
In addition to banking, Ma said transportation issues continue to be of great concern as California moves to implement the regulatory system established by legislation negotiated by the state Legislature and Gov. Jerry Brown. Board Member Ma will be convening a transportation-specific stakeholders meeting for medicinal cannabis, which is tentatively scheduled for Nov. 20.