Pubdate: Sat, 10 Oct 2015
Source: Alaska Dispatch News (AK)
Copyright: 2015 Alaska Dispatch Publishing
Contact:  http://www.adn.com/
Details: http://www.mapinc.org/media/18
Note: Anchorage Daily News until July '14
Author: Laurel Andrews

CAN THESE IDEAS SOLVE ALASKA'S MARIJUANA TAX CASH PROBLEM?

Alaska's Tax Division is in an unusual predicament as the state 
prepares to receive millions of dollars in marijuana tax money: it's 
not sure what to do with all that cash.

The problem? Alaska's marijuana businesses are barred from opening 
bank accounts. That means the money the state collects -- estimated 
at $5.1 million to $19.2 million for next year -- may be flowing into 
the state Revenue Department's Tax Division in briefcases and bags.

The scenario is not ideal for the division, which says increased 
security risks and a lack of manpower are reasons it doesn't want to 
be physically handling all the money.

Yet two potential solutions seem to be emerging in what division 
deputy director Brandon Spanos called the "cash problem."

Drug money or revenue?

The division had asked for "creative ideas" from entrepreneurs on how 
to handle the money flow. The final brainstorming workshop took place 
Wednesday in Anchorage, and the state was met by a responsive group. 
Among them were marijuana business owners, an attorney and an economist.

"In a perfect world, everyone would have a bank account and we would 
not be having this conversation," Claire Lettow, regulations 
specialist for the division, told the audience. That's not possible, 
however, with marijuana remaining illegal on the federal level, so 
Alaska's financial institutions aren't opening their doors to 
commercial businesses.

The state doesn't have the same problem. While banks must report 
marijuana businesses to the U.S. Department of the Treasury's 
Financial Crimes Enforcement Network, those requirements don't exist 
for the state.

As Lettow put it, "when the taxpayer gives money to the bank, it's 
drug money. When we give money to the bank, it's revenue."

After the brainstorming sessions, two potential ideas seem most 
promising, Spanos said.

The first option would be to use a transportation carrier, 
potentially an armored car, that would transfer the cash from a 
business directly to the state's bank account. The money would be 
counted at the business, and again at the bank, Spanos said.

While potentially expensive, businesses were receptive to this idea, 
Spanos said.

A second solution would be to install cash deposit machines -- 
essentially an ATM in reverse. Businesses would put their cash into a 
machine and get a receipt. The state would then go pick that money up 
and deposit it. This solution, potentially less-expensive, could be 
especially useful in rural Alaska, the division said, as 
transportation carriers may not be feasible.

Some in the audience said they supported this idea, while others 
pointed out potential issues: What if the machine is full? How many 
cash machines would the state need? How secure would these machines be?

Another potential option tossed around during the discussion would be 
to have a third party put the money into his or her own bank account, 
and have that person pay the taxes. For example, one attorney asked 
if he could pay the taxes on behalf of his clients; Lettow replied 
that she couldn't speak to the Alaska Bar Association's ethical 
boundaries, but for the division, that would work.

This third-party method is being used in Colorado, Spanos said, but 
isn't a fool-proof solution. Banks may close that third-party's 
account if they see that marijuana money is being funneled through.

Despite rigid banking rules, in both Colorado and Washington some 
marijuana businesses have succeeded at acquiring bank accounts. Some 
60 percent of Colorado's taxes are paid either electronically or via 
check, Spanos said.

No taxes for lost product

Alaska's excise tax on marijuana is $50 per ounce, paid to the state 
by marijuana growers. The growers pay the tax after their cannabis 
has been sold to retail or manufacturing facilities, the division 
explained to the audience Wednesday. That means if marijuana has to 
be discarded, for whatever reason, before it's sold, the growers 
aren't taxed on that lost product.

This state excise tax is different from sales taxes that both the 
cities of Fairbanks and Bethel approved in elections this week, and 
the division noted those communities will be facing similar questions 
on how to handle an influx of cash.

All excises taxes will go to the state's general fund.

Meanwhile, the Marijuana Control Board has submitted its entire batch 
of regulations for one more round of public comment. The board will 
hold hearings on Oct. 15-16, where the public can provide verbal 
input; written comments will be accepted until Nov. 11.

There's no deadline on when the division needs to have its rules in 
place, but Spanos said the division hopes to have proposed 
regulations by the end of the year. He asked the public to continue 
feeding the division any ideas and preferences on how to handle 
Alaska's marijuana money.
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MAP posted-by: Jay Bergstrom