The report does recommend several approaches for the state as it barrels toward a legalized recreational market on January 1-and plans for how to move the anticipated $7 billion in sales out of cash tills and into financial institutions.
The report is meant to help the state deal with a big problem that comes with the new legal pot market that most marijuana companies do only a cash business - including paying taxes. The production, distribution, sale, and possession of cannabis remain illegal under federal law.
Other states also have struggled with how to collect taxes from marijuana growers and retailers.
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The armored auto tax collection solution came about amid fears that operators carrying large bags of cash could be targets for theft and create problems for the state workers collecting and counting the money.
But the report cautions that the large amounts of cash associated with cannabis businesses already make their employees and customers targets of violent crime. "Armored courier services would eliminate the need to directly handle large sums of cash at branch offices or open deposit accounts at financial institutions", the report said.
"Such an arrangement would address a number of barriers to the collection of tax and fee payments, and result in increased safety, would not require banks to engage in activities that expose them to greater risk than they are willing to take, and increase taxpayer compliance", Chiang wrote in his recommendations.
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He suggested that lawmakers consider launching a state-backed bank that might be able to do business with the cannabis industry and give Californians an alternative to traditional banks. The report warned that the obstacles to creating a public financial institution are "formidable", including unknown startup costs, the probability of losses for several years or more that taxpayers would have to cover and trouble obtaining federal regulatory approval.
During the Obama administration, the Justice Department issued guidelines to help banks avoid federal prosecution when dealing with pot businesses in states where the drug is legal.
The players probably won't find a final consensus unless the federal government lifts restrictions on marijuana or agrees to allow banks to do business with cannabis companies.
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Currently, businesses with turnover of up to Rs. 1.5 crore are allowed to file returns and pay taxes every quarter. Cutting short the list of items in the highest tax slab of 28% is also a key demand.
Chiang wants the state and local agencies to create a single portal aggregating data on cannabis businesses, including names of key personnel, product lists, sources of supply, financial records and citations for violations. He says better banking practices would also benefit workers. Some credit unions and small banks there have offered banking services to the industry. The payments would then move to either a bank that accepts marijuana receipts or to a Federal Reserve site.