Recreational marijuana has been legally sold in California since the start of the year. The state treasury estimates that sales in 2018 will reach $7bn. But it will not collect its fair share, because pot taxes, it turns out, must be paid in cash. This makes tax collection “a nightmare”, as the treasury has described it. The predicament of Oregon, where recreational pot became legal in 2015, is a case in point. Sellers who declare sales have had to bring tax payments in cash every month to a guarded, bulletproof site in Salem, the state capital, no matter the distance they must travel. Operating only one such “cash-transaction unit” saves the revenue department money, but it also reduces the number of sellers who declare sales. So why can’t tax payments be made electronically?
Nearly two-thirds of America’s states have legalised pot sales for certain uses, but the federal government still classifies marijuana as a “Schedule 1” drug, on a par with heroin. Banks that handle marijuana money can be charged with money laundering. Pot businesses, therefore, are on the whole stuck working with cash, which causes problems for more than just tax collection. For starters, cash operations are inefficient. To pay its staff of 200 in cash, CannaCraft, a Californian maker of marijuana products, requires four employees who would otherwise be unneeded. Businesses restricted to cash are “targets for assaults” that endanger the public, laments California’s treasury. And as firms accumulate untraceable cash, some will offer bribes for operating permits, says Fred Timpner, head of the Michigan Association of Police. He expects recent arrests for such corruption in his state to be followed by more.
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