Taxation, Financial Institutions, and the Role of Cannabis-Related Businesses
In California, medical marijuana was made legal in 2003. Since that time, federal authorities have had a rocky relationship with marijuana facilities in the state. While raids have not resulted in any arrests, marijuana businesses have been shut down and plants have been destroyed. These incidents highlight the growing tension between federal and state authorities. This article will address the issue of cannabis-related taxation, financial institutions, and the role of these businesses.
Cannabis administration and opportunity act
In February, three senators announced their intent to introduce a comprehensive cannabis bill. While the specifics of the bill are not yet clear, stakeholders have submitted more than 1,800 comments on a discussion draft. The “Dear Colleague” letter to senators was also circulated. The Cannabis Administration and Opportunity Act is expected to be introduced in April 2022. Read more about the bill below. We hope to see it in action soon!
The CAOA bill would rescind federal prohibition of marijuana. It would recognize state laws that decriminalize marijuana possession and legalize it for recreational use. The bill would also allow for production and distribution of cannabis, create grant programs to help those who have been impacted by the war on drugs, and establish a federal taxation schedule. Additionally, it would open the door for increased financial services for cannabis businesses. But, before the bill passes, it must be passed by both chambers of Congress.
The Act also includes provisions to allow cannabis to cross state lines and travel internationally. While it would allow for the movement of cannabis products through interstate commerce, it does not prohibit them from being manufactured and sold in other countries. It also directs the government to transfer $10 million of the excise tax from cannabis to a trust fund managed by the Small Business Administration. The funds would be used to support small businesses and loan programs for historically disadvantaged individuals and women.
Compassionate Use Act
The Compassionate Use Act of 2016 makes marijuana use by people with serious medical conditions a viable option. While marijuana is still illegal federally, it is legal in the State of Colorado. This means that medical marijuana patients and providers can obtain their medicines with a doctor’s prescription. Although states are not required to enforce federal law, they cannot prosecute people who violate it. This means that the Compassionate Use Act of marijuana should distinguish between medical and recreational use.
As of January 2019, California is the only state that has made marijuana legal in small amounts. However, despite this change, there are still many issues with marijuana laws in California. The state’s Compassionate Use Act did not exempt individuals from federal prosecution and does not make it legal for individuals to grow more than the law allows. Despite these issues, medical marijuana remains a viable defense for personal and collective amounts and arrests.
The Compassionate Use Act protects the rights of medical marijuana cardholders and does not allow discrimination against them in the workplace. While employers are allowed to fire an employee for being impaired by marijuana, they have to give the employee the opportunity to respond to the allegations before making a decision. This means that individuals should contact the lab and explain that they use marijuana legally in their state. This may seem like a small issue, but the law is changing, and courts are only beginning to interpret it.
Taxes on marijuana sales vary by state
States that have legalized recreational marijuana have different tax structures. While Colorado and Massachusetts have opted for no sales tax, the state of South Dakota has set aside 15% of the retail price of cannabis for excise tax purposes. The state of Vermont, for example, has decriminalized the use of cannabis for medical purposes, but has not yet legalized the sale of recreational marijuana. A new bill was introduced in the state’s legislature that would add an excise tax of 14% on the retail sales of recreational marijuana. This bill has yet to be confirmed by the state, but there is no other indication on whether or not there will be a sales tax imposed on recreational cannabis.
California’s Department of Tax and Fee Administration oversees cannabis taxation. The Tax Guide for Cannabis Businesses includes information on the laws governing recreational marijuana. Colorado has legalized cannabis both for medical and recreational use. However, the state sales tax on recreational cannabis is 15%, but the state excise tax on medical marijuana is exempt from the 2.9% Colorado sales rate. Other states, such as Illinois, Maine, and New Hampshire have not yet legalized marijuana.
In Washington, cannabis tax revenue is divided among three key groups. The largest portion of cannabis tax revenue is diverted to the state Medicaid program, a government health insurance program for low-income residents. The second largest chunk, twenty-seven million dollars, is spent on the State General Fund. A quarter of that money goes to the Department of Social & Health Services, whose mission is to reduce the incidence of substance abuse and promote prevention. Another significant allocation is to youth residential treatment facilities and a 24-hour addiction hotline. Public health programs and marijuana education are also important aspects of marijuana tax revenue.
The federal government has recently made it easier for banks and other financial institutions to do business with cannabis-related businesses. An amendment to the National Defense Authorization Act paves the way for these businesses to be eligible for federally-backed banking services. However, the bill must still be passed by the House of Representatives in order to take effect. There are a number of alternative ways that financial institutions can comply with federal regulations.
As the demand for specialized banking solutions grows, more financial institutions are building programs for cannabis-related businesses. The new programs are necessary to ensure the continued relationship with high-value customers. Consider a prominent farming family who approached a large Midwest bank about their plans to grow marijuana and who explained that they were prepared to go elsewhere if necessary. After a few months, the bank finally agreed to work with the family, but the financial institution that financed their project was less than enthusiastic.
Banking for cannabis-related businesses is difficult in the current climate, but the opportunity is enormous. According to industry estimates, sales of marijuana in states that have legalized it will surpass $30 billion by 2025. Further, banks are more willing to provide banking services to these businesses due to less risk, as marijuana-derived products like CBD and hemp are federally legal. In addition, cannabis-related businesses are positioned to grow rapidly and are in need of access to mainstream financial products.
Potential impact of legalization on cartels
If marijuana is legalized across the United States, it could be a powerful weapon against Mexican drug cartels. The Mexican Competitiveness Institute recently released a study analyzing the impact of legalization on drug cartels. It found that, in states like Colorado, marijuana use would cost the cartels between 20 and 30 percent of their revenue. The Sinaloa cartel, for instance, predicted that their profits could fall as much as 50 percent. While these estimates are speculative, there are several factors to consider in this debate.
While legalization would make it easier for consumers to purchase marijuana legally, the impact on smaller Mexican gangs may be less significant. Although the Mexican Center for Competitiveness estimates that the illegal marijuana industry makes around $137 billion annually in profit, this would not do much to erode the cartels’ revenues. In fact, it would likely hurt them a little less than that if they lose the California market, which they use to sell pot to other states.
While there are several factors that may undermine the cartels, it is possible that legalizing cannabis would increase the revenue of the Mexican drug cartels and have a positive impact on the economy. Legalization of marijuana may even curb the growth of methamphetamine production in the country. Moreover, Mexican lawmakers are expected to vote on the bill by Dec. 15 and legalization would become law in that country.
Impossibility of preemption for medical marijuana laws
In 2006, the Ninth Circuit ruled that state medical marijuana statutes are constitutional, and it prohibited the federal government from prosecuting the officials who enforce them. That case is still under appeal, but it has raised the question of whether a state can regulate a medical marijuana dispensary that has been operating legally for many years. This question is important, because even in a state such as Arizona, federal prosecutors have said they will prosecute if a state medical marijuana law has been broken. Nevertheless, Congress has prohibited federal funding of efforts to prevent Arizona’s medical marijuana laws.
While state laws can legalize and regulate the use of medical marijuana, federal preemption applies only to state licensing laws that violate the CSA. Federal preemption of state laws governing marijuana would make these laws a direct obstacle to federal objectives. This would limit the expansion of state medical marijuana laws. The Oregon Supreme Court’s ruling in Emerald Steel highlights an important ambiguity in preemption. The court in Oregon has characterized state licensing laws as “affirmative state authorizations to use marijuana.” But, this does not mean that the states can’t enact laws that exempt a class of people from federal drug laws.
In a recent case involving the CSA and a state medical marijuana law, the court determined that the CSA preempts state laws. If a state’s medical marijuana law is illegal, a federal employer can be held liable for paying the employee’s medical expenses, even if they don’t do so directly. Regardless of the reason, subsidizing the purchase of marijuana is illegal.