BILL ANALYSIS Ó
AB 821
Page 1
ASSEMBLY THIRD READING
AB
821 (Gipson)
As Amended January 13, 2016
Majority vote
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Revenue & |5-3 |Ting, Dababneh, |Brough, Patterson, |
|Taxation | |Gipson, Mullin, Quirk |Wagner |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |12-5 |Gomez, Bloom, |Bigelow, Chang, |
| | |Bonilla, Bonta, |Gallagher, Jones, |
| | |Calderon, Daly, |Wagner |
| | |Eggman, Eduardo | |
| | |Garcia, Holden, | |
| | |Quirk, Weber, Wood | |
| | | | |
| | | | |
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SUMMARY: Authorizes that the Board of Equalization (BOE), until
January 1, 2022, to allow medical marijuana dispensaries to
remit tax liability due in a method other than an electronic
funds transfer (EFT).
AB 821
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EXISTING LAW:
1)Provides that any person whose estimated tax liability
averages $10,000 or more per month shall remit the amounts due
by an EFT. (Revenue and Taxation Code (R&TC) Section 6479.3.)
2)Provides that any person required to remit taxes who remits
those taxes by means other than appropriate EFT shall pay a
penalty of 10% of the amount of taxes. (R&TC Section 6479.3.)
3)Allows the BOE to relieve a person of the 10% penalty if that
person's failure to utilize an EFT is due to reasonable cause
and circumstances beyond the person's control, and occurred
notwithstanding the exercise of ordinary care and in the
absence of willful neglect. (R&TC Section 6479.4.)
FISCAL EFFECT: According to the Assembly Appropriations
Committee, minor administrative savings to the BOE in reduced
requests for relief of penalties to specific individuals who
currently make cash payments in excess of $10,000.
COMMENTS:
The author has provided the following statement in support of
this bill:
Currently, due to the fact that marijuana is still
federally classified as a Schedule 1 substance, the
medical marijuana industry has been rendered
"unbankable." This leads to companies having to hold
large amounts of cash and requires that tax payments
be made in cash as well.
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This bill seeks to support the state's collection of
tax payments by removing the penalty associated with
cash tax payments above $10,000 a month in cases where
an industry has lack of access to banking services.
Assembly Revenue and Taxation Committee staff comments:
1)Background. Individuals who run a marijuana dispensary in
compliance with California law are currently shut off from the
banking system. Marijuana is classified as a Class I drug and
the cultivation, sale, and possession can constitute a felony.
Therefore, the majority of banks and credit unions have
decided not to accept marijuana dispensaries as customers for
fear of federal sanctions. As such, less than 1% of all banks
and credit unions nationwide provide banking services to
cannabis businesses.
2)What is the Problem? Existing law requires that a person
remit tax liability due by an EFT if the estimated tax
liability averages $10,000 or more per month. A 10% penalty
of the tax amount due is added if other means are utilized.
Because many banks and credit unions refuse to accept medical
dispensaries as customers for fear of federal sanctions,
dispensaries that are remitting their tax liability have to
pay a 10% penalty in order to comply with the law. Existing
law also allows the BOE to waive the 10% penalty for medical
marijuana dispensaries if it can be shown that the failure to
utilize an EFT is due to reasonable cause and circumstances
beyond the person's control, and occurred notwithstanding the
exercise of ordinary care and in the absence of willful
neglect. However, the waiver must be requested and obtained
every time amounts due are remitted in a manner other than
EFT, which creates an unfair administrative burden for
cash-only industries. It appears, therefore, that the problem
is not the imposition of a penalty but the burden of having to
AB 821
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request the waiver. This bill alleviates the administrative
burden on both parties by allowing medical marijuana
dispensaries to remit tax liability due, until January 1,
2021, in a method other than an EFT.
Analysis Prepared by:
Carlos Anguiano / REV. & TAX. / (916) 319-2098 FN: 0002579