A Maryland tax official says the state has found an unusual workaround with Wells Fargo in order to avoid clearly identifying marijuana tax revenue on financial forms, yet another example of the creative workarounds being used by cannabis businesses and regulators amid ongoing federal prohibition.
“This was a heavy lift and something we had to do,” Rob Scheerer, director of the Maryland Office of the Comptroller’s Revenue Administration Division, reportedly said at a Maryland Association of Counties conference last week. “In order to protect the banks, we can’t even call this cannabis on the tax return.”
Instead, he added, “We have craftily called this ‘A sale subject to the 9 percent rate under Senate Bill 516 of 2023.’”
That legislation, which took effect July 1, ushered in the state’s legal cannabis system—as well as a 9 percent tax on adult-use marijuana sales. (Sales to registered medical patients remain tax-free.) Some cannabis companies have already paid the state tens of thousands of dollars, Scheerer said, declining to identify the businesses, but “the lion’s share of this revenue is really going to come in late October.”
The comments were first reported by Maryland Matters.
During the first month of legal adult-use sales, licensed retailers in Maryland moved more than $87 million in marijuana products—more than double the amount sold the previous month, when dispensaries served patients only.
Because marijuana remains illegal under federal law, banks and credit unions can face penalties from federal banking regulator for working with cannabis businesses. Under the 1970 Banking Secrecy Act, money identified as coming from federally illegal activity must be flagged through a suspicious activity report.
Neither Wells Fargo nor the Maryland Office of the Comptroller immediately replied to emails from Marijuana Moment ahead of publication on Wednesday.
Federal lawmakers have been working to address banking headaches caused by the state–federal conflict on marijuana through a bill called the Secure and Fair Enforcement (SAFE) Banking Act, which was reintroduced for the current legislative session in April. If passed, it would provide safe harbor for banks who do business with the cannabis industry.
Progress on the legislation has been slow, but Senate Majority Leader Chuck Schumer (D-NY) said at a press conference late last month that the work continues. Lawmakers are “making good progress” in bipartisan negotiations, he said, noting that advancing SAFE will be a priority during what he said should be a “very, very productive fall in the Senate.”
Days earlier, a lobbyist who briefly spoke with Schumer said the majority leader told him that “we’re working on it” when asked about the bill.
Senate Banking Committee Chairman Sherrod Brown (D-OH) and lead SAFE Banking Act cosponsor Sen. Steve Daines (R-MT) have sparred over next steps in recent weeks. Brown has insisted that Daines needs to secure more GOP cosponsors, but Daines argues that Republicans are already prepared to move the legislation as previously agreed to through the floor.
One source of contention is Section 10 of the bill. Democrats like Sen. Jack Reed (D-RI) have pushed for revising or eliminating the provisions, arguing that they would broadly undermine banking regulations. But Republicans view that as a “non-starter.”
Daines has also previously cautioned against attempting to expand the measure with social justice reforms that progressives would like to add, though his office has told Marijuana Moment that the senator is “open” to adding expungements language, as proposed by Schumer.
Meanwhile, the American Trade Association for Cannabis and Hemp (ATACH)—along with trade groups representing marijuana businesses in 16 states plus Washington, D.C.—sent a letter to Brown and Banking Committee Ranking Member Tim Scott (R-SC) last month, imploring them to pass the cannabis banking bill “without further delay.”
Schumer also recently spoke with a cannabis industry leader who approached him at an unrelated event this summer. According to that person, the Senate leader was feeling “confident” about the prospects of passing the cannabis banking bill.
Sen. Tommy Tuberville (R-AL), for his part, has said that he’s a “yes” on the legislation. But he doubts Democratic leadership will follow through on their pledge to get the job done this year.
Some advocates and lawmakers have floated changes they’d like to see incorporated into bill, such as expanding protections to all forms of financial services, including representation on major U.S. stock exchanges.
That request has faced some criticism from other advocates who say that would be an inappropriate move to help businesses while efforts to legalize marijuana stall in Congress.
Sen. Jacky Rosen (D-NV) also recently said that she wanted the SAFE Banking Act to pass with an amendment allowing cannabis businesses to access federal Small Business Administration (SBA) services.
In April, Schumer said he was “disappointed” that a so-called SAFE Plus package of cannabis reform legislation didn’t advance last year, saying “we came close,” but “we ran into opposition in the last minute.” He said lawmakers will continue to “work in a bipartisan way” to get the job done.
The majority leader has been holding meetings with Democratic and Republican members in the early months of the new Congress to discuss cannabis reform proposals that might have bipartisan buy-in this year.
Sen. Cory Booker (D-NJ) has said lawmakers are working to “resurrect” the cannabis reform package, acknowledging that failure to advance a banking fix for the industry “literally means that hundreds of businesses go out of business.
Rep. Earl Blumenauer (D-OR), who is a lead sponsor of the House version of the SAFE Banking Act, said at a recent press briefing that thinks it’s important that advocates and lawmakers align on any incremental proposals to end the drug war, warning against an “all-or-nothing” mentality.