Tax collectors get it right

Commentary By R.E. Graswich

It’s not easy to love a tax collector. But the cannabis industry and its supporters should be hugging the California State Board of Equalization.

The BOE, whose primary mission is to collect sales taxes, has taken a leadership role in preparing California for the brave new world of marijuana regulation. The tax collector has seen the future and embraced it.

Not only has the BOE been an early adaptor in cannabis oversight and compliance, it’s been an advocate of stakeholder outreach, education, transparency and accountability.

Board members Fiona Ma and George Runner, who represent 50 of the state’s 58 counties on the five-member BOE, have formed a bipartisan tag team that recognizes the realities and potential of commercial cannabis.

They have made field trips across the industry’s wide spectrum and organized educational workshops. They are working to find solutions to the vexing and hugely significant banking issue, hoping to gain electronic transactional access for cannabis producers, distributors and retailers.

And they are trying to talk some sense into the hundreds of city councils and county boards of supervisors who seem to believe marijuana will disappear if local jurisdictions ban it.

Certainly, the BOE has an objective: it wants to collect taxes on a potential billion-dollar industry. The agency collected $50 million in medical marijuana dispensary sales taxes in 2014, and barely scratched the surface.

But taxes can wait. No task is more urgent for state regulators than gaining trust and building cannabis regulatory partnerships with local authorities. The job is big and the clock is ticking.

New state regulations, signed by Gov. Jerry Brown in October and set to launch next year, won’t function without cooperation from cities and counties. The locals have to issue the permits that make the gears turn.

And that won’t happen when dozens of cities and counties are busy passing emergency ordinances to wholly or partially ban medical marijuana.

“There’s a huge part of the industry that wants to be compliant, that wants to be on Main Street,” Runner says. “It’s up to government to help.”

Runner spoke at a recent stakeholder workshop organized by Ma’s staff in Sacramento on “track and trace” strategies for cannabis – knowing where each plant goes from seed to sale.

The talk was largely techie and technical, but an underlying theme was set by Runner, who opened the meeting with remarks directed at reluctant, confused and frightened local governments.

“We as a government have got to be responsible,” Runner says. “This industry is not going to disappear just because some of us don’t happen to like it.”

Runner and Ma make an effective team. Both are former state legislators. Runner is conservative and Ma liberal. Both are respected beyond their party affiliations. And both have made cannabis regulation a cornerstone of their BOE portfolios.

Echoing Runner, John Hudak, a researcher with the Brookings Institution, says,  “Cannabis sales are real, whether you oppose it or don’t know. It’s a reality in a lot of places. You should hope that the government regulators get it right.”

Runner and Ma are using a passive-aggressive tactic with reluctant local governments. They admit the product isn’t for everyone. They acknowledge its status as an illegal drug under federal guidelines.

And they admit its ubiquitous presence in California – and warn it will only return underground if regulators don’t wrap their hearts and minds around it. State and municipal budgets will lose millions of potential tax dollars and thousands of jobs if marijuana retreats to the shadows. 

“If you’re against cannabis, at least you can be for transparency and accountability,” says Patrick Vo, CEO of BioTrackTHC, a vendor that provides seed-to-sale tracking services for several states.

Multiple state agencies, led by Consumer Affairs, Health, Food and Agriculture and the BOE, will be deeply involved in regulating marijuana.

It’s still early, but the BOE under Ma and Runner is engineering the pathway to California’s future with cannabis.