Unable to use the banking system, marijuana-related businesses will deliver cash to Salem in February to make their required payments on Oregon's new 25 percent tax on recreational pot sales. The state gladly will accept the cash — and then promptly deposit it in its bank account.
Ramsey Allred, manager of Rogue Valley Cannabis Dispensary on Crater Lake Avenue between Medford and White City, said he’s a little concerned about taking cash on a four-hour ride to Salem to pay the tax bill, but he said he’s used to operating a cash-only business and in taking precautions to protect it.
“It doesn’t bother me too much,” he said. “We believe in our Second Amendment rights.”
Because marijuana is still considered an illegal drug by the federal government, marijuana-related businesses are not allowed to use the nation's financial system to deposit their proceeds and write checks. The state and federal governments, however, have no qualms about collecting and depositing the taxes derived from pot sales.
Julia Dodson, spokeswoman for the Oregon Department of Revenue, said the cash received from marijuana businesses will be treated like any other revenue and deposited into a state bank account.
“The money that comes into state hands is not considered drug money,” she said.
About 400 dispensaries throughout Oregon will have to find a way to send the tax money to the Department of Revenue next month for the first of four quarterly tax payments. Transporting all those dollars may simply involve putting them in a container in the trunk of a car, a situation many dispensary owners describe as “risky,” while some acknowledge taking precautions, including arming themselves for protection. Many dispensary owners would like the state to consider offering local drop-off points.
Banks say they can’t accept money derived from the sale of marijuana, because it's still classified as a Schedule 1 drug by the federal government, placing it in the same category as heroin. Despite that designation, dispensary owners say the Internal Revenue Service will accept cashier's checks from them to cover income taxes owed the federal government.
There are efforts at both the state and federal level to revise the law to ensure banks are held harmless from any involvement with marijuana money. In July, U.S. Sens. Ron Wyden and Jeff Merkley, both D-Oregon, were among the sponsors of legislation that would prevent federal bank regulators from penalizing banks for working with legal marijuana businesses.
Legislation is also expected in the Oregon Legislature to remove any criminal liability from state law for those dealing with lawful cannabis businesses.
Meanwhile, the state Department of Revenue is gearing up to receive the sales tax money from dispensaries.
Dodson said most dispensaries will pay their state taxes in cash. Some dispensaries have gotten more creative, setting up bank accounts under a name that is not immediately recognizable as a pot business, she said.
Dodson said tax payments are submitted to the Department of Revenue just like any other tax. Once a payment is in state hands and received as "tax money," it can be placed in a bank, she said.
Her department estimates that up to $3 million in pot taxes will be collected this year.
Dispensaries will be assigned a business identification number by the state and be required to fill out paperwork to account for sales.
The cash has to be transported to the Department of Revenue’s main building at 955 Center St., Salem.
The 25 percent tax is temporary. Once the Oregon Liquor Control Commission begins licensing recreational marijuana stores later this year, the tax will be 17 percent, with an additional 3 percent local tax allowed. Money from the tax is expected to be distributed to schools and police in July 2017.
Like many dispensary operators, Allred said he welcomes the day when banks will take deposits from marijuana revenues. He said he estimates many dispensaries bring in $80,000 to $150,000 a month before expenses.
To take some of the sting out of the tax, Allred said, he’s been working with growers to bring down prices.
“We’ve got to make sure the customers are still coming in,” he said.
Marijuana is in ample supply in Southern Oregon, and Allred said he gets 10 to 15 growers a day offering their cannabis for sale.
“There are so many people that grow here,” he said. “A lot of it is really high-quality stuff.”
Allred said he was concerned the tax would drive away customers, but he has seen only a slight decrease in business and attributes that to the post-holiday retail slump.
The increased price of marijuana, however, is significant for customers who were not paying any tax on recreational marijuana last year.
“It’s good, but it kind of sucks,” said Cody Adair, 21, of Medford.
Adair, a customer of Fireside Dispensary in Phoenix, said the tax has been a bit of a drain on his pocketbook, but he said the money helps to legitimize the industry and will go to programs that benefit Oregonians.
“I’m not outraged by it,” Adair said.
Andrew Robison, manager of the Talent Health Club, said, “I thought the taxes were going to kill our sales, but holy cow, we’ve been doing really well.”
Transporting cash to Salem will be “burdensome” and "risky" for dispensaries, Robison said, but his dispensary has an employee who regularly makes trips to the northern part of the state and has agreed to deliver the money.
He said he’s been diligent in setting aside the collected tax money.
“The state of Oregon is going to benefit a lot from this,” he said.
Since he can’t put his money in a bank, Robison said, it’s somewhat surprising that the state can take the cannabis tax dollars and deposit them in its own bank account.
“Sounds like some legal above-ground laundering,” he quipped.
Noah Richardson, co-manager of Fireside Dispensary in Phoenix, said there are strict rules to follow to prepare the cash for transport to the state. All bills have to face the same direction and have to be sorted by denomination.
“There are security concerns, too,” Richardson said. But many businesses, not just dispensaries, are accustomed to dealing with cash, he said.
Richardson said he doesn't expect the tax will have any long-term impact on pot sales, noting Washington has a 37 percent tax and Colorado has a total tax of more than 25 percent, depending on the location in the state.
"I think most people were aware that it was coming," he said. "Most customers were prepared for what they'd find when they come to a dispensary."
Richardson said prices for marijuana have come down, helping to partially offset the tax load.
"We didn't want to raise our prices for our customers," he said.