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Montana prepares to collect taxes on medical marijuana

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Montana is set to collect its first quarterly medical marijuana tax in October.

BILLINGS, Mont. >> State revenue officials are working on the roll-out of the latest medical marijuana program with a tax on the drug — the first of its kind in the state — which could increase the agency’s capacity for handling cash.

Legislators passed SB333 this spring, adding a number of regulations to the program. That includes a gross sales tax that providers will start putting on the books on July 1, the Billings Gazette reported today (http://bit.ly/2qV3rJC).

The tax will be 4 percent of gross sales from July 1 to June 30, 2018. After that the tax will be 2 percent.

For the Montana Department of Revenue, much of the setup is no different from any other specialty tax.

“Getting our computer system changed so it can accept those returns and create those accounts” is their main concern, said Gene Walborn, deputy director at the revenue department.

What’s unknown is how much physical cash the department will have to handle for tax payments.

America’s burgeoning marijuana industry, including the medicinal sectors, have been characterized in part as cash-heavy businesses. This is because many banks, which are federally regulated and insured, don’t want to run afoul of federal law by servicing marijuana business transactions.

Marijuana remains illegal for all purposes under federal drug laws.

All that cash has caused logistical problems, chief of which has been safe money transportation. That includes tax payments by a medical marijuana business. How would a provider in far Eastern Montana deliver its cash tax payments to Helena securely?

If the revenue department does get a large cash infusion, it might need more infrastructure as well.

“We may have to do some changes to our physical buildings to be able to accept cash and maybe have some cash counters and that kind of thing,” Walborn said.

Those changes are not currently in the works, however. Walborn said the department will first see if it can handle the payments with the equipment and personnel already on hand.

Though the marijuana industry landscape maintains a shifting relationship with the federal government, there has been a sort of truce in recent years. As a Pew analysis noted, Obama-era U.S. Departments of Treasury and Justice would not interfere with marijuana regulatory systems created in states.

As a result, more transactions turned to credit, debit or checks through banks.

Walborn said that the department has spoken with other states that have been collecting recreational or medical marijuana taxes for years, and the indication is that more than half of transactions might not be through cash.

“What we’re hearing from other states, and from the industry too, is a lot of their business is now being done through banks so there’s not as much cash in the system,” Walborn said.

But it’s still unclear what the future holds at the federal level, as U.S. Attorney General Jeff Sessions has announced renewed enforcement of federal marijuana laws — even in legal states.

In general, Walborn said the assessment and collection of medical marijuana tax is anticipated to be almost routine. A fiscal note attached to the bill said that the 4-percent tax could bring in about $750,000.

That estimate used about 11,877 registered cardholders — the average in 2016 — to reach its calculation. The number of cardholders has ballooned to 15,563 in May. That number of cardholders could push the state’s tax earnings closer to $1 million.

The state is set to collect its first quarterly medical marijuana tax in October.

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