State unprepared to accept, store pot tax cash

Beginning in January the state will begin collecting taxes from legal marijuana businesses, most of which will be paid in cash. The Department of Revenue has not yet made infrastructure changes necessary to accept and store as much as $1 million a month the taxes are expected to generate.

SALEM — Oregon lawmakers questioned whether the state Department of Revenue will be ready to accept massive amounts of cash in 2016, when Oregonians begin paying a sales tax on recreational marijuana.

The department expects to collect approximately $1 million a month, with 40 to 80 percent in cash.

“The (Legislative Fiscal Office) report here states that a formal security assessment has yet to be conducted by either the Oregon State Police or an independent security firm,” state Sen. Doug Whitsett, R-Klamath Falls, said during a hearing by the Joint Subcommittee On General Government on Nov. 16. “You’re going to start getting money in January, a couple hundred thousand dollars in cash a day. When do you plan to make that secure, and how?”

John Galvin, a marijuana tax program and withholding and payroll tax manager at the Department of Revenue, said during the committee hearing that “time is not on our side here.” Galvin said lawmakers only moved responsibility for marijuana tax collection from the Oregon Liquor Control Commission, which regulates the new recreational pot market, to the Department of Revenue in late May.

The department had a security assessment scheduled with the Oregon State Police, and “our facilities team at the department has begun work creating a secure environment,” Galvin said. “They’ve had a structural analysis done for the safe. They’re starting to order cameras.”

Currently, adults age 21 and older can purchase limited marijuana products tax-free — seeds, dried leaves, flowers and non-flowering plants — at medical dispensaries, under an early sale law passed by the Legislature. A temporary 25 percent sales tax on these limited, early sale products takes effect Jan. 4, and stores can keep 2 percent of the tax to cover administrative costs, Galvin said. This will change to a permanent 17 percent sales tax, also with a 2 percent administrative hold back for stores, when licensed recreational marijuana retailers open in late 2016. There is no tax on pot for medical marijuana patients.

The Department of Revenue will also likely ask the Legislature for more money in the 2016 session to collect recreational marijuana taxes, Legislative Fiscal Office analyst John Borden said during the hearing. Borden said the Legislative Fiscal Office found the Department of Revenue might need more resources to collect the taxes, but could also streamline its operations and might be on the cusp of hiring employees for duplicative and potentially unnecessary jobs.

This story first appeared in the Oregon Capital Insider newsletter. To subscribe, go to oregoncapitalinsider.com

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