California marijuana retailers will be toting huge amounts of cash to the Franchise Tax Board and the IRS, as pot still is too illegal for banks to inhale.
The California Cannabis Working Group, organized by State Treasurer John Chiang, published “Banking Access Strategies for Cannabis-Related Businesses” in November to prepare for the implementation of the “California Control, Regulate and Tax Adult Use of Marijuana Initiative” (Proposition 64), which launched legal recreational marijuana sales on January 1.
But despite expectations of big sales and a flood of new taxes, the Group warned that no regulated bank would be willing to provide checking services for legal marijuana dealers to pay employees and taxes.
With legal and medical cannabis still categorized under the U.S. Controlled Substances Act as a Schedule 1 substance, California’s licensed marijuana businesses on Jan. 15 made their first payments under the federal tax code’s USC 280E, as is required for illegal drug traffickers and international criminal cartels.
Despite tax rates that are about 70 percent higher than fully legal businesses, substantial numbers of licensed marijuana businesses were showing up at IRS locations with large bundles of cash to make their first monthly social security, Medicare, and employee tax withholding payments.
The IRS responded by jacking up cash-counting capacity, hiring new staff in Denver, Seattle, and Los Angeles. Both federal and state officials expect that April 15, as the first corporate quarterly tax installment due date for 2018, will see huge cash payments.