Sol Sisters Farms in Independence grew marijuana for recreational use. (Oregon Department of Agriculture)
Cannabis companies will need to prove they’ve paid their state taxes to receive licenses under new rules announced Tuesday.
The new policy requested by Gov. Tina Kotek will require marijuana dispensaries to provide certificates from the Department of Revenue indicating that they’ve filed and paid all state taxes or have a payment plan for existing tax debt each time they try to renew their licenses with the Oregon Liquor and Cannabis Commission.
“This will help ensure that all businesses are operating under the same rules and not getting any competitive advantage if they haven’t paid their taxes,” Kotek said in a statement.
The new policy comes nearly two months after an explosive Willamette Week investigation found that state and federal tax regulators had issued tax liens totaling about $3 million against La Mota, the state’s second-largest cannabis chain and a major donor to Democratic politicians including Kotek.
Secretary of State Shemia Fagan resigned last week following revelations that she took a side job consulting for La Mota while her office audited the Liquor and Cannabis Commission, and Kotek and others have since donated their campaign contributions to charities.
About 9% of cannabis retailers haven’t fully paid their taxes, according to the Department of Revenue. Dispensaries are required to collect state sales taxes of 17% on all recreational marijuana, as well as 3% local taxes in many cities.
Craig Prins, executive director of the Oregon Liquor and Cannabis Commission, said in a press conference that most marijuana retailers collect taxes.
“This is a 90%, 10% issue,” Prins said. “Most of the folks in this industry are paying their taxes. We don’t want to lose sight of that.”
Prins said he plans to have draft language to the commission for a temporary rule by June 15 and to adopt a permanent rule by August or September. Dispensaries would be required to submit their certificates on a rolling basis as their licenses come up for renewal.
Several other state agencies require tax compliance certificates before issuing licenses, including for child care agencies licensed by the Department of Human Services and private security companies licensed by the Department of Public Safety, Standards and Training. Revenue department employees, people employed by the governor’s office and people Kotek appoints to state boards and commissions also need to have certificates.
Anyone can request a compliance certificate through the revenue department, Director Betsy Imholt said. Imholt said she first reached out to Prins on April 13 to discuss requiring certificates for cannabis companies.
Because marijuana remains illegal at the federal level, cannabis retailers don’t have access to the same banking services and financial tools as other industries. U.S. Sen. Jeff Merkley and Rep. Earl Blumenauer, both Democratic members of Oregon’s congressional delegation, have reintroduced legislation to allow marijuana businesses to use banks.
The marijuana industry’s reliance on cash makes it harder for the department of revenue to collect delinquent taxes.
“One of the big tools that collectors use is to garnish bank accounts, and that’s obviously not possible if they don’t have one,” Imholt said.
Marijuana tax collections in 2022 and early 2023 were significantly lower than expected, according to a February report from the state office of economic analysis, as dispensaries struggled to pay their bills. An oversupply of marijuana resulted in lower prices, with the average price per gram dipping from more than $8 in January 2017 to about $4 in January 2023.
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