How High is Too High

[00:00:08] Speaker A: Welcome to Taxing Poetic. I am your co host, Tim Howe. [00:00:12] Speaker B: I'm your other co host, Jenny Carter. [00:00:14] Speaker A: And as always, we're with our renowned producer JB. Glad to have you here today. [00:00:19] Speaker C: Thank you. [00:00:21] Speaker A: And today we're going to be talking about cannabis and taxation. How high is too high? [00:00:27] Speaker B: I have a feeling this is going to be a very popular episode. [00:00:30] Speaker A: Yeah. Let me go get my visine. [00:00:31] Speaker B: Right? Exactly. [00:00:33] Speaker C: I do want to bring you my cup. I lied. [00:00:35] Speaker B: All right, since we're at the beginning of the episode, you know what that means. It is time for me to tax Poetic with my newest haiku. Are you ready? [00:00:43] Speaker A: Poets Corner? Here we go. [00:00:44] Speaker B: Poets Corner. Okay. Cannabis sales tax takes all of my green money. Pass the cheetos, please. [00:00:56] Speaker A: That's awesome. [00:00:57] Speaker C: Really good. [00:00:57] Speaker B: You like that? [00:00:58] Speaker C: Yeah. [00:00:58] Speaker A: Actually, that is the first hike. Who I've truly enjoyed. It is really awesome. [00:01:03] Speaker B: Is it because you need the visine and that's why you like it? [00:01:06] Speaker A: Hey. [00:01:06] Speaker B: Because you want the cheetos? [00:01:07] Speaker A: We will not discuss what happened before this episode. How about that? [00:01:10] Speaker B: I know. How about we try to get through this episode without being 13 year olds? It's going to be tough for us. [00:01:15] Speaker A: Honestly, it is going to be pretty tough. [00:01:17] Speaker B: But we'll do our best. [00:01:17] Speaker A: There you go. Well, and with all of that, we actually brought in a cannabis expert today and I'd like to introduce her. Her name is Kelly Zach. She is from AAF CPAs in Boston, Massachusetts. Kelly, it is great to have you with us today. You want to get a quick introduction of yourself? [00:01:36] Speaker D: Sure thing. I'm so happy to be here. Love your podcast. So I've been with Afcpas for three years now and my official fancy title is Director of State and Local Tax. So I have a pretty extensive background working mostly in public multinational companies. And this is the first time I've been able to completely focus on my passion, which is state taxes and especially sales tax. So my firm actually has a huge specialty area in cannabis. So that's why Tim and Jenny said I would be a good guest. So I'm glad to be here. [00:02:10] Speaker A: Awesome. We are definitely glad to have you with you know, can you talk for like 2 seconds about the history of cannabis taxation and kind of where it came? How did how did we get to this whole point? Maybe even why weed is illegal to begin with? Should we say weed or we actually have to address it as cannabis. [00:02:28] Speaker B: Kelly, what is the proper vernacular? Should we call it? [00:02:30] Speaker D: Well, I'm glad you said that because I actually did a little digging to make sure I knew the difference between cannabis and marijuana. So cannabis covers everything that comes from one of the cannabis plants. There's two different kinds. Cannabis sativa, cannabis indica. Those are the actual plants that have all the chemical substances. Now, if you're calling something marijuana, that relates to the parts or the products of the plants that contain THC, which is obviously the fun part, tetrahydro cannabinol or some such thing. So that's the difference between cannabis and marijuana. So I used to think they were kind of used, could be used the same way, but they are a little. [00:03:10] Speaker A: Bit different, so they're not interchangeable at all. [00:03:12] Speaker B: I assumed they were. [00:03:14] Speaker D: I know cannabis is a more general. You can have parts of the cannabis plant that do not have THC. So I think that's more like the hemp stuff. So there's no THC, no psychotropic effects. And the parts of the plant that do have THC are the ones that obviously are more regulated from a narcotics perspective. So it actually was 1970. I thought it would have been later than that, but 1970, it was the Controlled Substances Act, and that's when cannabis marijuana was officially outlawed as a schedule One narcotic. So until very recently, it has been only illegal. Slowly but surely they went the medical route where states were allowing it for medical purposes. So you had to have a prescription and there were no taxes involved because it was essentially medication. Slowly but surely, some states were coming on board for use for recreational purposes. So that's been kind of the tricky part, is figuring out what the states are doing versus what the feds are fed. [00:04:25] Speaker A: Really? Has the Fed really even made any movement on this? I know there's been discussions about it, right. But they've kind of just let the states kind of do their thing. But then we have to get into this whole monetary exchange stuff, which we won't really spend a lot of time on. Right, but I mean, there's still this problem at the fed level, right, with this classification. [00:04:42] Speaker D: Exactly. So the fact that it's illegal federally means it's. The code section that the cannabis team lives and dies by is 280 E, which means you're not allowed to deduct any expenses. They can deduct anything that's considered cost of goods sold, but no GNA expenses, no salaries, none of that. None of that is deductible for federal tax purposes because it's an illegal substance. So that creates obviously huge tax burdens for these cannabis companies not being able to deduct anything. And there's all sorts of stuff that my cannabis team goes into on helping companies categorize their expenses. This really is considered cogs, so you can deduct it versus things that are clearly not anything related to cogs. [00:05:25] Speaker A: That is so interesting. [00:05:26] Speaker D: Yeah. So the states have been decoupling. We know that states often decouple from federal regulations, and the Feds might say this, but we're going to do it differently. So a lot of states are saying we are decoupling from 280, which means when you file your state tax return, your state income tax return, that return, you can actually deduct the expenses that were not allowed from a federal perspective. So it's a little bit of a little bit of help for our clients that our cannabis clients, that they can actually deduct some of these things at the state level, even though they're not allowed to deduct them at the federal level. [00:06:02] Speaker A: So are you effectively like creating permanent differences then, from an income tax perspective right, from the state returns versus the federal. [00:06:12] Speaker D: Know? And it does create these silos kind of at the state level that each state obviously determines its own rules, but it also because cannabis is illegal federally, you can't transport it across borders. So it's not like we in Massachusetts have to worry about how much it's going to cost in California, because if you live in Massachusetts, you can't buy it in California because it can't be sent to you in Massachusetts. So that could be a whole nother podcast on why cannabis companies aren't necessarily in a rush to get it legal for federal purposes, because then it costs way more to grow it and to cultivate it in Massachusetts than it does in California. [00:06:54] Speaker B: Oh, that makes a lot of sense. [00:06:55] Speaker A: Yeah. [00:06:55] Speaker B: Thought about it that way. [00:06:56] Speaker A: I mean, they're immediately limiting their market. Right, right, exactly. Yeah. Decreasing the capitalism effect. [00:07:02] Speaker D: Exactly. [00:07:03] Speaker B: Going back to the differences between cannabis and marijuana, are they taxed similarly or how does that work? [00:07:12] Speaker D: Well, some of the things that make it complicated, one thing right off the top of the bat is the tax rates are extremely high. So these things for states in which it's legal recreationally all, with a couple of exceptions, each of those states also has an excise tax type tax on the sale in addition to a sales tax. So your purchases are subject to your regular state tax rate, state sales tax rate. But then you have your marijuana excise tax on top of that, and Massachusetts all in you're upwards of 20% when you add in all the taxes for each sale. [00:07:52] Speaker B: That was one of my questions for you. I know when we've worked on these cannabis returns that we filed the sales tax and the excise tax. I had assumed the sales tax was on other TPP, but is the sales tax on top of it's actually the marijuana or cannabis sales? [00:08:09] Speaker D: Exactly. [00:08:10] Speaker B: Okay. Oh, well, I learned something new today. [00:08:12] Speaker D: Because we would have, like, say, some dispensaries might sell T shirts or hats or whatnot. So those things would only be subject to the sales tax, but anything that's considered part of cannabis or marijuana, those would also be subject to the marijuana excise tax. So that's where you get up to your 20%. 37%. [00:08:33] Speaker A: Yeah. So that excise tax in Massachusetts then doing my quick math, is probably around 14% to 15%. [00:08:40] Speaker D: Right, right. Wow. [00:08:42] Speaker A: That's insane. [00:08:43] Speaker D: It's crazy. That is absolutely. [00:08:44] Speaker A: You said Washington's 37. [00:08:47] Speaker D: 37%. Yeah. [00:08:48] Speaker A: Holy smokes. [00:08:50] Speaker D: Yeah, it's crazy. [00:08:51] Speaker A: Well, this is, I guess, kind of why you're hearing a little bit too about the whole movement away from even though they had legalized it. And people are happy about dispensaries and doing all this other stuff that actually off market, or should we say under market or black market type sales are actually making a big comeback, right, because of that whole taxation component, 100%. [00:09:12] Speaker D: And we hear anecdotally from not necessarily our clients, but from people we know. They saying it's too expensive for me to buy it in a dispensary. I'm going to keep buying it from my pal Joe down the street who doesn't charge any sales tax. I don't know if there's any charts or anything anywhere that can say how much the industry is actually losing on this, but it's certainly anecdotally. You know, people are saying that they're going to keep buying it illegally because they don't want to pay an extra 20% or 37%. [00:09:44] Speaker B: Are the states doing this on purpose to limit marijuana use or purchases or. [00:09:52] Speaker D: What'S their another great question. So some people might call this a syntax, right? So like cigarettes or alcohol, when it was starting to come about, people were saying we are going to levy it in part to address the negative effects of marijuana use. It certainly is regulated and certainly safer. There's tons of regulation that each cultivator has to go through to make sure their product is safe. So you're not going to get that from the guy next door down the street. So that's part of it is to make it safer. But I think the sin tax on something like cigarettes is the government saying, hey, we know cigarettes are bad for you, so we're going to put this tax out there to try to limit consumption, to try to tell people to stop smoking. But that's not necessarily the case with cannabis because it's a huge money maker for the state and at least their spiel is that it's not as harmful as cigarettes. So we're going to have this kind of a syntax, but it's not because we think it's really bad for you, it's because we want, as the state want to make money off it. [00:11:02] Speaker A: And it's so interesting because if you look at I know there was a recent release by the CDTFA, which is the California Department of Tax and Fee Administration, to where they're actually going to be increasing the amount of vendors compensation back to qualified retailers like qualified cannabis retailers to say, hey, we're going to give you 20% upwards of 20% of your tax collected. You're going to be able to keep if you've been a certified or approved cannabis vendor. And that to me is like what's so interesting is that they're saying, hey, we're going to try and it looks like they're trying to incentivize basically people to be qualified and registered cannabis retailers to help eliminate this off market sales types issue. But again, it just seems to me like the government's trying to do something that may be not really productive. It's counterproductive, right? I mean, the whole idea is the cost and the all in cost of this. And it's like maybe you should reduce the tax rate versus trying to incentivize people because you already have people. You've created the market. Right, right. [00:12:08] Speaker D: Exactly. [00:12:09] Speaker A: It's very interesting. [00:12:13] Speaker D: There's a big push also on to go back to the licensing. When they came up with this, they said, we really want to make sure we're doing it the right way. So they're limiting the licenses that they issue, but they're really supposed to be limiting monopolies. So I think it's something like one entity can't own more than three dispensaries or something along those lines. So they're trying to limit big, huge companies from just coming in and buying every dispensary in Massachusetts. [00:12:41] Speaker A: They want to keep it like maybe in 2 seconds, obviously longer than 2 seconds. But can you talk a little bit about the funds issue? Right. The monetary exchange issue with this with regards to banking and what people are dealing with on the banking side of this? Because that's the thing that I found so interesting. When we first went and proposed on a cannabis client in Colorado, the question was like, well, how are we going to get paid? Right. How can we get paid? Because we're based here in Georgia and they're in Colorado and that exchange of money federally is technically not allowed, right? [00:13:17] Speaker D: Yep. That's a huge and I learned a lot more about this recently. It's it's a cash flow problem because it's illegal federally. They generally can't get regular loans because the loans are certified by the federal government. So most of the funding is private funding and they have to find some deep pockets so they're not able to get their working capital. They paid so much in taxes, they're having trouble keeping up with their working capital needs. So actually, I heard anecdote yesterday that some lenders are getting around it by saying, we're going to secure the loan by the real estate, not by the product. Because if someone defaults on a loan, they can't seize the product because it's illegal. So now lenders are coming back saying, maybe we can secure the loan on the real estate and get around it that way. But that's definitely a huge problem. [00:14:11] Speaker A: So, like, if you're doing an asset based lending facility, like an ABL or something like that, you couldn't turn around and secure it against inventory like they normally would. [00:14:21] Speaker D: Right, exactly. Yeah. So that's definitely a problem for them. [00:14:24] Speaker A: Wow, that's very interesting. And then like we were saying, like the exchange of money, like if they were trying to put it in or trying to move money across state lines or move it to another bank, they're not technically really allowed to do that. Right. Which is why they have to use state banks. [00:14:38] Speaker D: Yes, exactly. [00:14:39] Speaker A: Yeah, typically local banks. Yeah. It's very interesting. [00:14:42] Speaker B: That leads us into our next segment that we like to do called, you know what's weird? Do you have any weird things to share with us? I mean, you've already shared some pretty weird stuff. That's unusual. [00:14:54] Speaker D: Well, the one weird thing that I literally just learned yesterday and it has nothing to do with taxes, is that there are male and female cannabis plants, and only the female plants can produce THC. And basically only female plants could get you high. I didn't know there was such a thing. [00:15:13] Speaker B: Girl power. [00:15:14] Speaker D: Did you guys know that? [00:15:15] Speaker A: Yeah. I honestly did not know that. [00:15:17] Speaker B: I didn't either, but that makes so. [00:15:19] Speaker A: Much sense, because only females drive you crazy. Only females will be able to drive. [00:15:24] Speaker B: You crazy and make you paranoid. [00:15:26] Speaker A: That's exactly it. And really hungry. [00:15:28] Speaker D: Not only that, but these plants can spontaneously change their sex. The cultivating of them is so important, and they treat them. I went to one of our facilities, one of our clients, and it's extraordinary the love and care they put into these plants, the certain nutrients that they have at each stage of the game, because the light has to be right, the air has to be right, because if they're shocked in any way, they could change sex. And then they turn from a plant that can produce marijuana to a plant that cannot. [00:16:02] Speaker A: So it just smells really funny. [00:16:04] Speaker B: So no jump scares for the plant. [00:16:05] Speaker D: Exactly. [00:16:06] Speaker B: No scary movies. [00:16:07] Speaker D: You have to be the gentle voice. [00:16:13] Speaker B: Also, like females, you have to JB, did you know any of this? You seem to know a lot about this industry. [00:16:24] Speaker C: I know a group of people. We need to apologize. [00:16:29] Speaker D: Love that's. My favorite part of your sessions. The people that you insult and have to apologize to afterwards. [00:16:34] Speaker B: The list is usually pretty long. Yeah. [00:16:37] Speaker A: Distinguished. [00:16:38] Speaker B: That is an excellent you know what's weird? [00:16:41] Speaker D: Wow. [00:16:41] Speaker B: I'm still recovered from that. So many. [00:16:43] Speaker A: Did you get any free samples? [00:16:44] Speaker D: Yeah. [00:16:44] Speaker A: Don't lie. You totally did, didn't you? [00:16:47] Speaker D: No, totally did not. But they do have a dispensary. So this was a huge facility we have, and there is a dispensary attached to it. So we might have done a little shopping after our tour. I'm not going to lie. [00:17:00] Speaker B: That's what we loved. Kelly, I know you and I have been to these sales tax conferences, and the cannabis classes are always the most well attended. You and I have been to some together. [00:17:12] Speaker D: Sure. [00:17:12] Speaker B: And everyone's pretty lively. And that's the first joke, is are there any free samples? [00:17:18] Speaker D: Exactly. [00:17:20] Speaker A: So I got a question for you, and I was wondering if you knew this offhand. So cannabis food products, right? So obviously you go into a dispensary and you see, like, a cookie or you'll see a brownie or candy or any of that stuff. Do you know? Because I honestly don't know this. Are they actually subject to prepared food or, like, grocery sales tax rates as opposed to standard sales tax rates? [00:17:45] Speaker D: That's a great question, and I don't know the answer. And I'm wondering now because we have one. I'm trying to think of the returns that I've seen, and I know that we have a lot of clients that have edibles, and I don't think we treat the edibles any differently than we would just the flour itself. [00:18:01] Speaker A: And you would actually I don't know. [00:18:02] Speaker D: The answer to that. [00:18:03] Speaker A: Yeah, you would actually think that because the food actually contains THC, then overarching would be that it would be subject to the full sales and use tax right. Regardless of what the method is of delivery, which exactly? I don't know. I always thought that would be interesting. That'd be an interesting court case to challenge. [00:18:19] Speaker B: Yeah, let's work on that. [00:18:21] Speaker D: Well, that leads into another point I wanted to make, that most of the excise taxes are basically like a sales tax. You take the retail price at the marijuana excise tax rate. But there are other ways that some states are taxing it, and some do it based on weight. So you literally weigh the product that you buy and the excise taxes based on that. But what people are trying to push for is some states based it on the level of THC. So more THC means higher tax. That's just another thing that people are bandying about to change the way things. [00:18:58] Speaker A: Are currently working, and that's some of the way that alcohol is treated right. Is by exactly level of alcohol percentage by volume, maybe. [00:19:05] Speaker D: And that's exactly what they reference, far. [00:19:09] Speaker A: Be it from our federal government to make a logical, common sense alignment of taxation. [00:19:14] Speaker B: But here we go. [00:19:15] Speaker A: Oh, gosh. [00:19:15] Speaker B: All right. [00:19:17] Speaker C: So I just read that you don't get a tax break on it like you would. So, for example, in Illinois, where you would normally get a grocery sales tax break, you actually don't get one if you make, like, a pop brownie as opposed to a regular brownie, which you would okay, so it's possible that they do think that it's food, see, because. [00:19:38] Speaker A: It fits the definition of food. Everything about it would be food. It's just you got some really cool ingredient in there, know, launches you off like rocketman, but whatever. [00:19:48] Speaker D: Exactly. [00:19:48] Speaker B: Tell us about Kelly. I always enjoy the different types of products your clients have, like the sodas what? [00:19:55] Speaker D: Candy? [00:19:56] Speaker B: Lollipops, baked goods. What else? [00:19:59] Speaker D: The seltzers are huge, and they're very explicit on how much THC is in them. So there's tons of seltzers, certainly the edibles and the candy. The other thing I found out is there's a cannabis place here that it's ice cream, but it's only ice cream. So the whole shop is cannabis infused ice cream, which I thought was pretty. [00:20:24] Speaker A: Cool because it point me in the direction. Please, Lord, point me in the direction. [00:20:29] Speaker B: Just killing two birds with 1 st. I mean, lo with 1 st. Get it? [00:20:35] Speaker D: I have yet to try it, but I am dying to. I just thought that was such a cool. They put themselves out there looking like an ice cream shop at all, but you have to show your ID to be able to buy your ice cream. [00:20:46] Speaker A: But you talk about perpetual motion, like, you're sitting there, you're eating cannabis ice cream and you're getting the munchies, so you eat more cannabis ice cream. Man, JB's over here. Just like you're just there for the rest of your life. It's amazing. [00:21:01] Speaker D: They're coming up with all sorts of cool scientific ways to see, like back in the day, keep things interesting. [00:21:07] Speaker A: Tommy Chong and Marin, like, never had. [00:21:09] Speaker D: To deal with these issues. [00:21:10] Speaker A: Right? [00:21:11] Speaker D: Exactly. [00:21:12] Speaker B: Oh, the good old days. [00:21:13] Speaker A: The good old days. [00:21:15] Speaker B: Now you're waxing poetic. [00:21:17] Speaker A: There you go. That's exactly. So where do you see this going next? Are you seeing I mean, we just talked about the ice cream and some of that other fun stuff. Are you on the field that you ultimately think the Fed's just going to go ahead and legalize this across the board? They're going to have to. [00:21:36] Speaker D: I tend to think so. With more and more states decoupling. I tend to think so. Although I talked to the partner, our firm, who knows more than me, he's just not sure. They've been talking about it for so long, he's not sure. What he is thinking is that more and more states are going to decouple and more and more states are going to come online as recreational. So he's looking at it that way, not holding out too much hope that the Feds are going to get their act together and legalize it, but certainly thinking that the states are going to continue to say, wait a minute, these states are making a ton of dough. Let's decouple and let's legalize it and see what kind of tax dollars we can get. [00:22:15] Speaker B: The states are making a ton of green. [00:22:18] Speaker D: Ton of green. But the sales prices are plummeting. We looked about three years ago, I think I saw something, it was like, say, $4,500 a pound. In Massachusetts, it's now down to closer to $2,000 a pound. So as markets mature, the prices more dispensaries, more supply, more people growing, the prices are plummeting. So is the state going to have to take a step back and say, wait a minute, we're not making as much as we did when it first came out? Is that when we look at the tax based on THC rather than sales price, would that give us more revenue? Obviously, those are the kind of things we're seeing. [00:23:00] Speaker A: That's two grand a pound above what the consumer's normal cost and the cost of goods sold is. Right. And the profit that the company is actually making. That's an expensive pound of dope, dude. [00:23:12] Speaker D: Yeah, it is. [00:23:14] Speaker B: I think Minnesota is the latest state to legalize adult use cannabis on August 1 and 10% tax is 10% on grocery seats. [00:23:24] Speaker A: Man. [00:23:24] Speaker C: Not bad. [00:23:25] Speaker B: Not bad. [00:23:27] Speaker D: Yeah. [00:23:27] Speaker C: The people in exactly Washington I know. Christmas. [00:23:34] Speaker A: We're moving. [00:23:35] Speaker D: Yes, I know. What's are the states going to say? Hey, wait. Like, exactly what I said. If it becomes legal as the revenue goes down because the price is going down, are states going to say exactly that? Do we increase the rate? Do we change the tax base? They call it an advalorum tax, which I wasn't sure what that was until I dug a little bit better, but based it on either the weight or the level of THC to kind of make it a different type of to. The Cannabis Control Commission is coming out with stuff all the time, and like I said, the team in my firm got their ear to the ground and attends all the conferences, so they know the troubles that are out there for the growers and the dispensaries, and they kind of also hear what the states are saying. So it's cool. That's what makes it fun is it's so new and exciting and it's constantly changing. I've become an honorary member of the cannabis team here, and we have shirts and everything. [00:24:32] Speaker B: I want a shirt. [00:24:34] Speaker D: We kind of walk around the office in our cool cannabis shirts, and we're like the cool kids on the block. So maybe I'll get you guys a couple of T shirts. Okay? [00:24:41] Speaker A: That would be right. I mean, just imagine if you lived in Minnesota. Now that they've legalized it, though, for like, three and a half months out of the year, you're basically just going to stock up on a bunch of frozen pizzas, sit in your house, never leave. [00:24:54] Speaker B: And ice cream. [00:24:55] Speaker A: And ice cream. [00:24:57] Speaker D: And Cheetos. To Jenny. [00:24:58] Speaker A: Oh, yeah. And Cheetos be awesome. Well, in all honesty, Kelly, this has been a fantastic segment. We really enjoyed everything that you've been able to expose us to on this cannabis topic. I've learned a ton today. [00:25:15] Speaker B: And whenever the federal government does legalize it federally, we'll have to have you back on because then it's going to be like all on war exactly. With states and who's doing what, looking. [00:25:29] Speaker A: At the concentration of the market and everything else and who's going to basically become the major providers and mean. Yeah. It's going to be really interesting. It is very interesting. Hey, Kelly, thank you again. It's been an absolutely amazing segment. I think we both learned a ton. [00:25:45] Speaker B: I'm a little tired, actually, for some reason. [00:25:48] Speaker A: Are you hungry? [00:25:48] Speaker B: I'm hungry and tired, yeah. [00:25:49] Speaker A: JB looks like he's already passed out, but no. Again, thank you very much. We are going to take a quick break, and then we're going to come back with pop quiz hotshot. [00:26:00] Speaker B: Pot quiz. [00:26:01] Speaker A: Pot quiz hotshot. [00:26:02] Speaker C: Yes. Ugg. [00:26:07] Speaker B: Welcome back, everyone, to Taxing Poetic. We are ready for our pop quiz, or as I said earlier, pot quiz hotshot. [00:26:15] Speaker C: Pot quiz. [00:26:17] Speaker B: Yeah, that's great. [00:26:18] Speaker C: Okay, Tim, the first one is for you. Let's see. I'm going to ask you a preface question. It doesn't count towards the quiz. I just want to know if you know the answer to this because it will help you with the second part. I think you need it. How many states is recreational cannabis legal? [00:26:36] Speaker A: I'm going to say 17. [00:26:38] Speaker C: Now, Kelly, I want to ask a follow up to you real quick. If I say recreational cannabis, is that grammatically incorrect? Because recreational marijuana because cannabis is everything. Does that not make sense to say no. [00:26:53] Speaker D: Even though I told you in the beginning that they're different, we kind of sometimes do use them interchangeably. So when we say recreational cannabis, no. [00:27:00] Speaker C: One'S going to write it and be like, you're a dumb, dumb idiot. [00:27:03] Speaker D: No, okay, absolutely. [00:27:05] Speaker A: Well, they're probably going to be too baked. [00:27:07] Speaker D: Yeah, they won't really care. [00:27:10] Speaker A: He just said cannabis. [00:27:12] Speaker C: Okay, so how many states is recreational cannabis legal? [00:27:16] Speaker A: I'm going to say 17. [00:27:19] Speaker C: So it's 23 plus the District of Columbia. [00:27:22] Speaker A: Oh, wow. [00:27:22] Speaker C: Okay. [00:27:23] Speaker A: Man, I was short. [00:27:23] Speaker C: All right, so your actual quiz question, when it comes to sales tax, how many level and excise tax on cannabis? [00:27:32] Speaker A: I'm going to say based off of the discussions with Kelly earlier, I'm going to say 22. [00:27:38] Speaker C: Okay, so it's 20 or possibly 21. [00:27:43] Speaker A: Okay. [00:27:43] Speaker C: I would have given you both. So the ones that I found out and Donna found out and actually, Kelly, I believe you said the same thing. Delaware, Minnesota and Virginia and DC. All don't. Okay, but then we just read about July 1, 2023, where Minnesota now does a 10% tax on it. I don't know if that's an excise tax. [00:28:04] Speaker A: It's a tax on gross receipts. And so, yeah, you would think that it's going to be an excise tax because their sales tax I mean, I'm kind of curious to look and see. Is their sales tax going to be or is the cannabis going to be subject to sales tax? I'm pretty sure with Minnesota that it's going to be, yeah. [00:28:18] Speaker B: Probably yourself into a correct answer is what you're saying. [00:28:21] Speaker A: That's what I'm doing. [00:28:23] Speaker C: I would have given him 21, but he said 22. [00:28:26] Speaker B: Minnesota. [00:28:26] Speaker C: Minnesota 22. It is a good thing. And Jenny, I think you get a little bit of a hint now that all these answers are going to be up based on 2022 data. Like the twelve month, like nothing is going to, I say, bleed into this year. That probably makes sense on the Minnesota thing. Okay. [00:28:41] Speaker A: All right, so Tim gets a goose egg there. [00:28:43] Speaker C: All right, Jenny, what were the first two states to legalize recreational cannabis? [00:28:50] Speaker B: California and Washington. [00:28:53] Speaker C: You got one, but it was Colorado. [00:28:55] Speaker A: Colorado? Yeah. [00:28:56] Speaker C: Come on. Yeah, dude, not with Tim and the. [00:28:59] Speaker B: Oh, I should have known better. [00:29:01] Speaker C: We always have to mention the state of Colorado. We have not one time not mentioned the state of Colorado. No matter who we're talking about, they absolutely always get the most shout out. [00:29:09] Speaker A: To my Colorado family. Absolutely love it. [00:29:12] Speaker B: All right. So zero for me. [00:29:14] Speaker C: Yeah. Okay, Tim, here's a nice, fun three part question for you. What are the three categories for levying tax on cannabis? [00:29:24] Speaker A: Three categories for levying tax on cannabis? Can you define categories? Are we talking levels? I think I know layers similar to. [00:29:33] Speaker C: How like the boozy. [00:29:38] Speaker A: So we've got an excise tax, we've got a sales tax, and then we have a what would be the third excise sales? [00:29:51] Speaker B: Marijuana retail tax. [00:29:52] Speaker C: Marijuana retail tax. [00:29:54] Speaker A: So those three she answered for me. She did. [00:29:58] Speaker C: I guess we just give Tim the point. No, I would give you the point if he did it. [00:30:03] Speaker B: Oh, really? [00:30:05] Speaker C: Give me the point. I love it. [00:30:07] Speaker A: I can't get skunked. [00:30:08] Speaker B: We're on the record here anyway, that I helped you. [00:30:10] Speaker A: There we go. [00:30:11] Speaker C: Okay, Jenny, without going over oh, boy. What? How much money was collected in taxes last year? There was twelve states that had all twelve months. I'll give you a little hint there. How much money was collected in 2022? [00:30:25] Speaker A: Taxes for so you're talking total tax revenue? [00:30:27] Speaker B: Total tax revenue for twelve states. [00:30:29] Speaker C: There was twelve states that had all twelve months. There were different. I mean, randomly, people would legalize it. [00:30:34] Speaker B: On a thing without going over. And in honor of Bob Barker's recent passing, let's see. [00:30:42] Speaker A: You can't use $1. [00:30:43] Speaker B: I can't use one dollars. [00:30:44] Speaker A: Darn it. [00:30:46] Speaker B: Okay. Oh, this is hard because I could go, like, way out there. Let's do 250,000,000. [00:30:56] Speaker C: I mean, not even close. [00:30:58] Speaker A: I was going to say, like 4 billion. [00:31:00] Speaker C: Yeah, 3 billion. [00:31:01] Speaker A: 3 billion. [00:31:02] Speaker B: Billion. Billion with A-B-I was going to go to $1 billion, but I thought that would be way over. And you said not to go over. [00:31:08] Speaker C: No, that's right. [00:31:09] Speaker B: Yeah. [00:31:10] Speaker A: Okay, here's one. [00:31:11] Speaker C: All right, Tim, historically, it starts with medical marijuana being legal, then recreational. Which state had the shortest time frame from medical to recreational? [00:31:22] Speaker A: Nevada. [00:31:23] Speaker C: Kelly, do you know? [00:31:26] Speaker D: I don't I would have guessed. [00:31:28] Speaker C: I'll give you a hint. [00:31:29] Speaker D: I don't. [00:31:30] Speaker C: You live there. [00:31:31] Speaker A: Massachusetts. [00:31:32] Speaker D: Okay. So it is mass. Yeah. [00:31:33] Speaker C: Really? So I guess it makes sense that statistically speaking, that will continue. You'll go medical, then they'll be like, okay, cool, now we're in. And then it's like, going to be closer. So California was the longest. It was like 7000 days from medical being legal to recreational. [00:31:52] Speaker B: So you could say medical is the gateway. [00:31:57] Speaker C: You definitely could. [00:31:58] Speaker A: Yeah. Remember they had a whole Entourage episode about them getting their medical marijuana cards and being able to get that's right. [00:32:05] Speaker B: Yes. [00:32:06] Speaker C: Sounds right. Okay, Jenny, here's your actual third question. Okay. In the state of Massachusetts, what happens if a cannabis dispensary does not remit its required sales tax? [00:32:17] Speaker B: They lose their license. It gets shut down. [00:32:20] Speaker C: Their license will be revoked. I mean, duh. But congratulations. [00:32:24] Speaker B: One, two, one. [00:32:26] Speaker A: I have a complete look of like. [00:32:29] Speaker B: I'm dismayed you only have one point because of sir, so have yourself some ice cream and calm down. [00:32:38] Speaker A: Kelly, we're coming up for a tour and we would like a t shirt. [00:32:42] Speaker D: Absolutely awesome. I got the perfect place. [00:32:45] Speaker A: I love it. I absolutely love well, and thank you again so much for joining us know we had a really good time talking with you, Kelly. [00:32:53] Speaker B: I can't wait to see you at the next conference and we'll go to. [00:32:55] Speaker D: Classes know, and giggle, the whole I know, I can't wait. I know it was awesome. You know me, I could talk all day. So if you think of another topic that I might be good at too, please reach out. [00:33:06] Speaker A: We will definitely bring you on as a guest again in the future. [00:33:08] Speaker B: Yes. [00:33:09] Speaker A: Love having you here. [00:33:10] Speaker D: Awesome. [00:33:11] Speaker B: Wait, who did we oh, yeah. [00:33:12] Speaker C: So our apologies. Not too bad today. Females. A good 50% of the population. But who offended them? [00:33:21] Speaker B: Tim should apologize. [00:33:24] Speaker C: I just wrote females, females, females, female. The hard one. [00:33:30] Speaker A: Oh, yeah. When we were talking about the plants. [00:33:32] Speaker C: Yes. I may even interject the apology. Just like them. Okay. The Washington cannabis dealers. I just feel sorry for the 37%. [00:33:44] Speaker A: That's just a we're not apologizing to them. We're apologizing for them. Yeah. [00:33:49] Speaker B: On behalf of we feel bad for them. [00:33:52] Speaker D: Yes. [00:33:52] Speaker C: I'm so sorry. [00:33:54] Speaker B: Thank you so much for joining us today on Taxing poetic. Just a reminder to please subscribe and follow on Spotify, Apple, Amazon, Stitcher. Or you can watch us on YouTube. Thanks so much. We'll see you soon. [00:34:06] Speaker A: Awesome. Cut it. [00:34:07] Speaker C: Good job.