Struck the cannabis interest he is set to kick into high gear next year as a state begins issuing licenses for the retail sale of marijuana. A major hurdle excess for the industry and the government that will collect taxes on cannabis sales. That is the inability of cannabis businesses to our bank accounts because marijuana is still illegal under federal law. Here is John.The reality is that the bulletproof solution will remain elusive until the federal government removes cannabis from the official list of banned drugs or Congress approves safe harbor legislation protecting banks that serve cannabis businesses from prosecution. But that is not an excuse for action.A working group headed by John has been celebrating -- analyzing this problem for months. Joining me is James, the banking reporter with a large Angelus times. Welcome to the programIt is good to be here expect most banks are skittish about accepting money from pot companies. What problems does that present? But it presents all sorts of problems. It makes it without the ability to get a bank account and businesses cannot accept credit card payments. They transact with customers exclusively in cash generally. It means that when they need to buy equipment or supplies or pay rent or pay employees, they are transacting in cash. There are bills, tens and 20s and 50s floating around at that present safety risks for employees and businesses and it presents problems for simple things like paying taxes. The dispensary owner that I spoke with talked about having to drive a duffel bag full of cash to downtown LA and parking in a parking garage and walking through a quasi-homeless encampment just to get to the front door of the building or wait in line to drop off his tax payment. Is problematic.It does not make you feel like you are dealing in a legal business.Let's talk about one solution. One is the use of armored cars. What would that do you expect what they are suggesting is that the state work with local governments to hire armored car services that would go around and pick up tax payments directly from cannabis businesses so they would, they do not have to go downtown or go to whatever jurisdiction they need to pay and drop off the duffel bag full of cash. Certainly, that would help a bit. It would reduce the number of trips that the businesses and owners have to take with cash. At the same time, some business owners but I spoke with, they came out and said that is not helping, even if I can pay my taxes, I am paying my suppliers in cash. I have to buy equipment in cash and pay my employees in cash.Another idea under the study is a date owned bank. How would that work?That is a good question. The state treasurer and the Attorney General will look into that. There is one publicly or state owned bank in the nation, the Bank of North Dakota. There used to be more back in the 19th century. There is one left. There have been various efforts in other states to start more. Those efforts have never gotten off the ground. It could operate like an ordinary bank pick the difference is instead of being owned by shareholders and those getting whatever profit the bank Nate makes, it would be the state. That is how it works in North Dakota. They make payments to the state treasury from time to time. If they had a bank, the state would control the policies of the bank. The state could say as a matter policy, this publicly owned bank is willing to accept a pauseDeposits from cannabis companies. That is the idea but there are reasons why there is only one public bank in the country and why other efforts to create one has failed. A lot of people in the industry like the idea but they are not hopeful it will cut to fruition.What have others date doing? What do they do in Colorado?They have all of these same problems. In Colorado, there was an effort for people to start a credit union that would serve the industry. The state regulators signed off on that. They ran into a problem with the federal government pick they could not get a master account with the Federal Reserve. Without having that master account, the details are not important but without the master account, you are not a real rank or a real credit union. You cannot get access to the systems that make a bank look like what you would think of as a bank. That credit union has never gotten off the ground and is not accepting deposits from cannabis companies. Companies are in the same boat. They rely on cash. Often they have bank accounts with banks that do not really know the full extent of direct business or think the company as a property management company instead of a cannabis dispensary. That is the state of affairs where it is legal.You write that when California comes out with its regulations for licensing and that a business can prove it is a licensed cannabis business in California, that might open the door to some of the businesses being able to gain access to bank accounts?It is possible, that is the hope. Right now, there is no such thing as a state permit, a state permitted cannabis business. Right now, all of the regulation in California is local. That will change next year but you know, I was talking to a cannabis business owner who was saying, if you are a bank and you are interested in serving this industry, it is not impossible. You probably want to take on a handful of clients to make it worthwhile. If you want a bank 10 or 20 or 50 cannabis businesses, right now with the regulations being local, you might have to familiarize yourself with the local cannabis regulations in 10 or 20 or 50 jurisdictions. That is the regulatory -- it is a regulatory nightmare to say the least. Once there are state guidelines and businesses can be state regular, there may be banks and credit unions that will say okay we are willing to work with companies that are state licensed because we know what the state laws are.I am speaking with James, the banking reporter with the Los Angeles times. Thank you so much.Thank you for having me.
California should use armored cars to transport hundreds of millions of dollars in cash tax payments expected next year with the state's legal marijuana market, the state treasurer said Tuesday. The state on Jan. 1 will enter a new era with cannabis when recreational sales become legal and join the long-standing medical industry in what will become the largest U.S. legal pot economy.
But the new market estimated to grow to $7 billion annually has a troubling flaw: Marijuana remains illegal under federal law, so most banks won't do business with pot growers, manufacturers or retailers. That means marijuana companies typically operate only in cash.
Among California's new state taxes that will go into effect next year is a 15 percent levy on all marijuana purchases by consumers, including medical marijuana.
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State Treasurer John Chiang formed a task force to work on a solution for gathering the money because the state expects to collect hundreds of millions of dollars from legal pot sales.
The armored car 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.
"It is unfair and a public safety risk to require a legal industry to haul duffel bags of cash to pay taxes, employees and utility bills," Chiang said in a statement.
He added that the marijuana industry's "reliance on cash paints a target on the back of cannabis operators and makes them and the general public vulnerable to violence and organized crime."
In a report based on the findings of the state's Cannabis Banking Working Group, Chiang also said that changes are needed in Washington to either legalize pot in the U.S., or shield financial institutions that serve the cannabis industry from possible prosecution.
But that seems unlikely anytime soon, so the report recommended:
—The state should work with banks to contract an armored courier service to collect tax payments made in cash from businesses, and shuttle those payments to a secure counting facility before it's eventually deposited in state accounts.
"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. It wasn't immediately clear who would pay for the service.
RELATED: San Diego City Council Approves Regulations For Marijuana Businesses
—Conducting a study on the potential to create a public cannabis bank or other financial institution to serve the industry. 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.
—Forming a group of cannabis-friendly states, businesses and banks to push for changes in Washington for improved banking access for the industry that would reduce or eliminate the need for marijuana businesses to use cash.
—To encourage greater access to banks, state and local governments should create an online portal to collect data on cannabis businesses. It would be designed to help banks assess potential customers and include licensing and regulatory information, data on key personnel, sources of supply and financial records.
Chiang warned in a letter accompanying the recommendations that "the clash between state and federal law threatens to cripple legal California cannabis businesses before they even get up and running."
"The inability of cannabis operations to get banking services means that many of them may remain in the underground economy and not become transparent, regulated, tax-paying businesses, as California voters intended," he said.
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.
But most banks don't see those rules as a legal protection against charges that could include aiding drug trafficking. And they say the rules are hard to follow, in effect placing the burden on banks to determine if a pot business is operating legally.
The number of banks and credit unions willing to handle pot money is growing. But they still represent only a tiny fraction of the industry.
Colorado tried in 2015 to set up a credit union to serve the marijuana industry but was blocked by the Federal Reserve.
