$350,000 in cash? California cannabis taxes still make growers — and tax collectors — nervous
On tax days, it’s not hard to spot marijuana growers waiting to exhale in downtown Eureka.
They haul cash in grocery bags and boxes, making their way to a state office where they can pay their taxes.
One grower “holds his breath as he walks into the building,” said Terra Carver, executive director of the Humboldt County Growers Alliance. The distance is “no more than 20 yards, but the fact that he was holding $350,000 (makes it) ... a public safety issue.”
California still doesn’t have a better way to collect taxes from its burgeoning, licensed marijuana industry three years after voters passed an initiative to legalize recreational cannabis and 23 years after they sanctioned medical marijuana.
That won’t change as long as marijuana is considered an illegal drug by federal authorities, which makes banks reluctant to do business with the cannabis industry.
But from Eureka to San Diego, the state is making some headway in easing obstacles that kept cannabis entrepreneurs from paying their state taxes and fees on time.
For starters, California finally has state tax collectors stationed in the heart of the so-called Emerald Triangle, which produces most of America’s marijuana. The tax collectors work out of a Humboldt County building with support from state and local law enforcement officers.
That’s a big change. Until last year, state-licensed marijuana companies from Humboldt, Mendocino and Trinity counties had to drive hundreds of miles with bags full of cash to pay their taxes at the nearest state offices in Sacramento or in San Francisco.
“It has been unacceptable that legal cannabis farmers have to drive up to five hours to pay their taxes or have a face-to face with their regulatory agencies,” said Sen. Mike McGuire, D-Healdsburg. “This isn’t safe for the farmer, it isn’t safe for the public and it definitely isn’t a good way to do business.”
On the opposite end of the state, California tax offices in San Diego County simply refused to accept money from cannabis companies in 2016 and 2017 after state workers worried their offices weren’t equipped for that kind of cash businesses.
Their fears persuaded elected representatives overseeing regional tax offices for what was the Board of Equalization to prohibit cannabis growers and retailers from making cash payments at state offices in their districts.
“You have to think about hostage situations,” former Board of Equalization member Diane Harkey said at a December 2016 meeting where she explained why she was reluctant to permit cannabis cash transactions at offices she oversaw without significant investments in security.
Her colleague former Board of Equalization member Jerome Horton at the same meeting suggested state workers should receive “combat pay” for working with hefty cash payments.
Russell Lowery, Harkey’s former chief of staff, said the Board of Equalization allowed alternate payment arrangements at the time, such as tax collectors meeting cannabis growers at banks and depositing funds directly into state accounts. Those visits were not promoted because of security fears, he said.
State Treasurer Fiona Ma, who was on the Board of Equalization at the time, said the state did not lose money because of the inconvenience.
“Everyone who was supposed to pay, paid,” she said. “They all knew they had to pay. They just had to hire more security or armored cars because they had to drive.”
The Board of Equalization no longer has power to allow varying tax collection policies around the state.