Ideas & Insights

The Solution to California’s Cannabis Cash Problem

The Solution to California’s Cannabis Cash Problem

MGO’s innovative solution to the main banking issues Government Agencies and Cannabis Businesses are facing in California starting January 1st.

Recently, the California State Treasurer’s Cannabis Banking Working Group (CBWG) released a report that addresses banking issues related to the sale of recreational cannabis . While that report offers reasonable and concrete strategies to address some of those issues, it does raise some questions.

The bottom line is that cash is going to be a problem in the California cannabis industry. Until the federal government makes traditional banks feel more confident about working with cannabis business, it will be a cash based economy. MGO has been working this problem and created the California Cannabis Tax Collection (“CCTC”) Solution. We suggest you read our full report , however, we can briefly address some of the most pressing issues cannabis businesses and state agencies are facing:

  • Problem: If you are a cannabis business, get ready to pay some huge penalties. Most cannabis businesses pay their taxes in cash because they can’t find a traditional banking solution. Many cannabis businesses will be forced to pay a 10% penalty if they fail to pay by electronic funds transfer.
  • Solution: Utilizing a smart safe in conjunction with MGO’s third party administrator concept. The Third Party Administrator makes sure all the taxes and fees are properly paid, coordinates with the cannabis business, and facilitates the armored courier.

  • Problem: Multiple Agencies need to collect revenue from each cannabis business. Currently that process is cumbersome on both the business and agency.
  • Solution: Put simply, centralization. We recommend a Third Party Administrator which digitally summarizes deposits made by the cannabis business and distributes the taxes and fees to the appropriate agency while providing an audit trail of all tax payments. It’s essentially one solution for many agencies on a single open platform.

  • Problem: Lack of a digital “paper” trail. Currently every business tracks their money differently, making reconciliation and auditing difficult.
  • Solution: Again, here is where that Third Party Administrator comes in and creates a paper trail, standardizes the reporting, and streamlines the process. Our solution allows for multiple smart safes to be connected to our portal. This creates a broader reach to agencies, centralizes data, and allows for it to be viewed under one roof.

  • Problem: The CBWG recommends the use of armored car, which is a great idea in theory. However, many armored car services will be unable to participate because they have federal contracts, which prohibit them from working with cannabis businesses.
  • Solution: MGO has relationships with Armored Couriers that do not have federal contracts, meet the necessary insurance requirements and have access to the bank facilities to be able to work with state and local governments.

MGO’s California Cannabis Tax Collection (“CCTC”) Solution is a pathway to a comprehensive resolution for cannabis business operators and state agencies seeking a process that provides security, transparency, and efficiency. The CCTC solution was recently identified as a solution by the California State Treasurer’s Cannabis Banking Working Group.

For the complete California Cannabis Tax Collection Solution, download here >




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