Banking and Buds

A Governmental Dynamic Duo Take On Cannabis Banking

  ·  Clever Root   ·  Link to Article

In 1996 California voters passed Proposition 215, the Compassionate Use Act, allowing the use of medical cannabis. Medical cannabis would be taxed at the retail level, similar to other tangible personal products, with the tax collection administered by the California State Board of Equalization (BOE).

When Fiona Ma was elected to the BOE in 2014, one of her first questions was, "How much revenue is being collected from the cannabis industry?" It was unclear since there's no check off box for "cannabis" when applying for a seller's permit. To the best of BOE's calculations, approximately $39 million was collected in sales taxes in 2014, which translated to about $450 million in total taxable sales from dispensaries with a seller's permit. Fiona thought this number was too low and started her two-year fact-finding journey on the tax challenges facing the industry.

After the passage of Proposition 64 (Adult Use of Marijuana Act) in November 2016, California State Treasurer John Chiang convened a Cannabis Banking Stakeholder Working Group, comprising representatives from 17 different state agencies and major stakeholder groups. The group has met three times since December 2016, with three more meetings to go. The goal is to develop recommendations on how to effectively open access to the banking system to cannabis-related industries to help retail and medicinal cannabis business owners effectively participate in commerce. Hopefully the group will be able to come up with some workable solutions to bank this budding new industry.

As California state and local regulators work tirelessly to create the framework needed to meet the new licensing requirements by January 2018, the tsunami is here. It's picking up energy and momentum every day, and looks to the Cannabis Banking Stakeholder Group to find a path for the cash.