Cannabis businesses across California have been forced to use alternative means to manage their money due to the fact that the federal government still considers marijuana a schedule I drug. California is finally taking action on the state level to accommodate the country's largest legal marijuana market. The California Senate passed a bill that will establish a special class of banks to service the cannabis industry.
Today the Senate voted 35-1 to pass SB 51 that would allow individuals to start banks and credit unions that could accept cash deposits from marijuana dispensaries. These financial institutions would essentially be able to create checking accounts for these businesses and issue checks that cannabis retailers could use to pay taxes, rent or California-based vendors.
California lawmakers are encouraged by the bill noting that it would make it easier for cannabis businesses to pay state taxes, which were underwhelming after the first year of recreational marijuana sales. The author of the bill, Senator Bob Hertzberg, explained that "This is as close as we can get until the federal government changes its policy." The bill will now move to the California Assembly for a vote.
Since marijuana is still illegal on the federal level, any financial institution choosing to accept funds from cannabis businesses jeopardize losing federal deposit insurance. The prevents legal marijuana dispensaries from obtaining credit and debit cards forcing them to store their cash in non-traditional ways. Sen. Hertzberg pointed out that this puts these businesses at risk for armed robberies and results in "millions of dollars buried in barrels."
Legislators are hoping that this bill will help boost tax collection revenue as the state fell short of August projections by $100 million. Republican Senator Jeff Stone acknowledged that California is losing “hundreds of millions” of dollars in taxes since cannabis businesses are forced to pay in cash. "They've got to come in with wheelbarrows to carry in all the cash," Stone added.
Cannabis retailers point to a flourishing black market in California when addressing lackluster sales in the first year. To make matters worse, California recently tabled a tax cut for the cannabis industry that would’ve temporarily lowered taxes on cultivators to reduce the excise tax from 15% to 11% to give retailers the opportunity to attract consumers away from buying on the blackmarket.