Next Milestone for Alaska’s Young Cannabis Industry: Paying Taxes

Published on November 17, 2016 · Last updated July 28, 2020
This state office in downtown Anchorage is home to Alaska's only in-person drop-site for cash tax payments from cannabis businesses. (AP/Mark Thiessen)

ANCHORAGE, Alaska (AP) — With legal cannabis sales underway in Alaska, growers will soon be submitting their first tax payments to the state.

For most businesses, that wouldn’t be a problem: They’d just cut a check. But some banks are leery about dealing with cannabis businesses since marijuana remains illegal at the federal level. And that means, at least initially, Alaska’s legal cannabis businesses could have to make their tax payments to the state by dropping off or mailing bundles of cash.

How will it work?

The Department of Revenue has set up a deposit safe in downtown Anchorage, Alaska’s only in-person drop site for cash, in a state office where people pay child support and can sign up for Alaska’s yearly oil wealth fund check. Businesses given a key to access the drop site will place tamper-resistant bags into a tray and close a cover. The bags will then drop into a drum and down a chute to a safe.

The state also is offering a by-mail option, where cannabis cultivators can send cash payments via registered mail and have them picked up and brought to the state by an armed carrier. They also can pay electronically or by wire transfer, said Brandon Spanos, deputy director of the Revenue Department’s tax division.

Who pays the tax?

Growers are required to pay taxes on sales and transfers of marijuana — $50 an ounce for buds and flowers and $15 an ounce for other parts of the plant.

In Oregon, revenue officials transformed a small space at their headquarters into a mini-fortress for dropping off, counting and transporting cash.

It’s 320 miles roundtrip from Leif Abel’s family growing operation in the tiny town of Kasilof to Anchorage. Abel, a co-owner of Greatland Ganja LLC, said the business already has to get product to retail customers around the state and take samples of its products to an Anchorage lab for testing.

“So you can imagine that one more stop on the way is really not that big of a deal,” said Abel, who is also on the board of the Alaska Marijuana Industry Association. He said he just has to make sure trips are as efficient as possible.

New tax structure

Alaska’s first cannabis stores opened last month after the launch of the state’s first testing lab. This month will be the first month in which the state begins receiving marijuana tax revenue.

It’s too early to say how much the tax might generate, Spanos said. Legislation passed earlier this year calls for half of marijuana revenue collected in Alaska to go into a fund that can be used for programs intended to curb recidivism. The rest would go to the state general fund and could be used for anything.

Other states with legal adult-use cannabis also have special security measures in place for cash tax payments. In Oregon, revenue officials transformed a small space at their headquarters into a mini-fortress for dropping off, counting and transporting cash to the bank. To discourage continued use of cash amid security concerns and as banks and credit unions began working with businesses, Washington state earlier this year instituted a penalty for those choosing to pay in cash.

Taxes paid or owed in Washington since July top $110 million, according to that state’s Liquor and Cannabis Board.

Industry challenges

Some banks and credit unions do business with cannabis proprietors in other states with legalized marijuana. But Cary Carrigan, the Alaska Marijuana Industry Association’s executive director, thinks it will be an all-cash business in Alaska for now. He cited skittishness among the state’s bankers.

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Washington has posted sales and compliance information for marijuana businesses online to help make it easier for banks to suss out any problems. Most businesses there now pay in some form other than cash, said Brian Smith, a spokesman for that state’s Liquor and Cannabis Board.

Oregon lawmakers have cleared the way for regulators to share certain data with banks interested in working with the industry to help prove businesses are authorized to operate there, said Mark Pettinger, a spokesman for the Oregon Liquor Control Commission who handles marijuana questions.

Dicey situation

In states where cannabis has been legalized, many businesses have been able to get some kind of banking services, sometimes working with a small local institution or getting an account under a personal name or a business name that doesn’t immediately signal it’s a marijuana business, said Taylor West, deputy director of the National Cannabis Industry Association. But she said banking remains a “dicey” prospect, and some who have gotten accounts worry about being able to maintain them.

Resolving the banking issue is important because operating with only cash presents security concerns, she said.

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