Struggling with the prospect of handling millions of dollars in cash from commercial marijuana businesses, Alaska's Department of Revenue is holding three brainstorming sessions to get ideas for how to handle the influx of taxes in an industry shut off from basic banking practices.
"It's an uncharted territory. ... We don't have any precedent to go off of, really," said Claire Lettow, regulations specialist for the state Tax Division.
Since marijuana remains illegal federally, Alaska's financial institutions so far aren't opening their doors to commercial businesses. That means, like other states that have legalized recreational marijuana, businesses will be dealing in cash. Potentially a lot of cash.
Alaska's Department of Revenue estimates that it will take in between $5.1 million and $19.2 million in tax revenue from commercial marijuana in 2016.
"If the majority of it is coming in in cash, we're going to have an issue with that," Lettow said.
For Alaska's Tax Division, a major influx of cash means security risks, and a lot more manpower spent simply counting money.
"We're not in the business of being bankers," Lettow said.
The division is already anticipating hiring an auditor and tax technician to handle the new marijuana taxes, but doesn't have much wiggle room to invest in other possible necessities, such as armored vehicles, Lettow said.
The division is hoping for "creative ideas" from the marijuana industry as to how to best manage the cash flow, and what alternatives there might be to a cash-only industry, Lettow said.
"It's a brainstorming session," Lettow said. "We want people to throw (their ideas) out to us."
Other states that have legalized recreational marijuana are facing the same issue. In Colorado, the Fourth Corner Credit Union has filed a lawsuit against the Federal Reserve after it rejected an application for the credit union to start serving hundreds of licensed marijuana businesses.
Colorado has also seen banks open, and then close, accounts belonging to marijuana businesses.
"None of it feels very stable," said Alcoholic Beverage and Marijuana Control Board director Cynthia Franklin.
The banking issue is "very serious and it's very troubling. … If I could have two seconds with Obama, (to talk about) anything with marijuana, I would ask him to fix the banking problem," Franklin said last week, referring to President Barack Obama's recent visit to Alaska.
The state of Washington's tax division made some tweaks to help manage retail taxes that brought in cash from the new industry, said Kim Schmanke, spokesperson for the Washington State Department of Revenue.
"We enhanced our security. … We made sure to consider what kind of safes we would need -- were the safes large enough?" Schmanke said.
The department set up an appointment system, where marijuana businesses -- or any business paying taxes in cash -- come in and head to a secured room equipped with a cash-counting machine, purchased by the department to cut back on the staff time, risk and human error of counting cash. That investment has greatly streamlined the process, Schmanke said.
Washington has the advantage, however, or having a few financial institutions willing to work with marijuana businesses, such as Salal Credit Union. Meanwhile other businesses have managed to fly under the radar, and have a bank account without being flagged by their financial institution. "That isn't the ideal way, though," Schmanke said.
The fact that some businesses can have bank accounts means that, from July 2014 to June 2015, only 14.5 percent of marijuana retail taxes were paid in cash, Schmanke said.
"We'd ideally like to see the federal banking regulations support these legitimate businesses. … Until that time comes though, we have been pleasantly surprised," Schmanke said.
Alaska does not appear poised to have that same blessings from its banks.
"We've been asking all the financial intuitions and basically right now, the answer is no," said Kevin Anselm, director of the Alaska Division of Banking and Securities.
The issue is federal law, said Dan McCue, senior vice president of corporate administration Alaska USA Federal Credit Union. "The federal government hasn't recognized marijuana as a legal business, so therefore federal institutions … are prohibited from providing services to that business," McCue said.
And while the U.S. Department of the Treasury has given guidance to the financial industry on how to work with marijuana businesses, the demands are "far beyond what they normally require," Franklin said.
For instance, a financial institution is required to file "Suspicious Activity Reports" for all marijuana businesses on a continuing basis, as outlined in a 2014 Department of Justice memo.
The question of whether Alaska would consider a state-run bank is "not off the table," but also not currently going anywhere, Anselm said.
"Right now, we don't have any good options," Anselm said. "But we are looking."
Workshop dates and locations:
Fairbanks: Tuesday, Sept. 29, 12:00 p.m. to 2:00 p.m.
Legislative Information Office, 1292 Sadler Way, Suite 308
Teleconference: 844-586-9085
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Centennial Hall, 101 Egan Dr.
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Access code: 86539
Anchorage: Wednesday, October 7, 11:00 a.m. to 1:00 p.m.
Atwood Building, 550 W. 7th Ave, Suite 104
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