California looking to legalize crypto for cannabis tax payments
California lawmakers have introduced a bill that would allow cannabis-related business to pay taxes in stablecoins.
This bill, Assembly Bill 953, would allow the state, city, and county offices in California to accept stablecoins starting January 1st, 2020.
From the assembly bill filing:
"This bill, on and after January 1, 2020, would allow the legislative body of a city or the board of supervisors of a county to determine and implement a method by which a licensee under MAUCRSA may remit any city or county cannabis license tax amounts due by payment using stablecoins, as defined. The bill would authorize that city or county in determining that method to either accept stablecoins directly into a digital wallet controlled by that jurisdiction or to utilize a third-party digital asset payment processor that allows for the immediate conversion of any payments made by stablecoins into United States dollars and deposit into an account of that jurisdiction."
Current California state law imposes a 15% tax on the purchase of cannabis. The law also imposes a tax on cannabis farmers and cultivators. But these businesses typically have to pay tax in cash. Banks refuse to work with cannabis businesses because marijuana is still federally classified as a schedule 1 drug. As a result, banks could technically be engaging in money laundering if they do business with the cannabis industry.
As a result, cannabis companies deal in cash. This includes paying taxes in cash, often with armored transports — an operation that entails significant cost and risk. Cryptocurrency payments, particularly with stablecoins, are a solution to the problem by means of bypassing banks and physical cash.
This bill defines a stablecoin as follows:
“(3) ‘Stablecoin’ means a digital asset that has price stable characteristics pegged to United States dollars and United States dollars serve as collateral to that digital asset.”
Ohio currently allows businesses to pay taxes in Bitcoin, but so far only two businesses used this option. This bill in California has a more relevant use case as many cannabis businesses are locked out of traditional financial services.
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