California Bill Proposes Crypto Tax Payments for Cannabis Businesses
California cannabis-related businesses could soon be paying their taxes in cryptocurrencies.. Assembly Bill 953 (AB-953), if passed into law, will allow for payment of taxes in stablecoins.
The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) allows for a county to impose a tax on cannabis-related business activities.
Introduced by California Assembly members Phil Ting and Kevin McCarty, AB-953 proposes crypto payments by next year.
“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 defines stablecoins as a digital asset that is pegged to the US dollar which serves as its collateral.
There are currently several stablecoins being traded in the cryptocurrency markets. Tether is the most popular, with a market capitalization of over $2 billion. The controversial coin, however, has also been criticized as being manipulated.
Other stablecoins include USD Coin, DAI and the Gemini dollar, with market caps of $234 million, $89 million and $70 million.
Stablecoins could be accepted directly into a state-controlled digital wallet or through a third-party payment processor.
“The bill would authorize the department in determining this method to either accept stablecoins directly into a state-controlled digital wallet 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 a state account. The bill would allow the department to consult with the State Treasurer’s office as needed to implement that payment method.”
California’s Department of Tax and Fee Administration imposes the cannabis excise tax and the cannabis cultivation tax. The rate of state excise tax is 15% of the market average price of any retail sale.
California joins a growing list of jurisdictions introducing cryptocurrencies as a medium for taxation. In January, lawmakers in New Hampshire introduced a bill to legalize tax payments in Bitcoin.
If the proposed legislation is passed into law, however, it is not exactly clear which stablecoins may be accepted and how California would carry out timely audits to verify that the stablecoins used are backed by USD.