State seeks bank willing to handle new pot revenue
The state asked for bids this month for a bank to handle its main account. A must-have in the bids: willingness to accept deposits of marijuana revenue.
OLYMPIA — Wanted: A bank for state government. Must offer attentive customer service. Must be able to handle several deposits a day with drop-offs of up to 40 bags at a time. Must allow an account to be overdrafted during the day by more than $1.2 billion.
Oh, and must accept proceeds from the sale of pot.
As Washington shops for a bank, meeting that last demand might not be as hard as it sounds.
The state’s current banker already has agreed to it, according to the state treasurer, who says that despite federal restrictions Washington shouldn’t face reprisals for banking and spending the revenue that will come from pot taxes and fees.
“I’m not too worried about it,” Treasurer Jim McIntire said. “It’s actually one of the advantages of having Bank of America as your contractor. It’s unlikely, I think, that the federal government would raid them. And they’re big enough to look out for themselves on this.”
Bank of America’s seven-year contract to hold the state’s main account ends June 30, and the state asked for bids this month in a request that calls out deposits of marijuana revenue as a must-have.
In the meantime, the state expects to start depositing revenue from Initiative 502, which legalized the recreational use of marijuana. The Liquor Control Board will receive its first fees in November from applicants asking the board for licenses to grow and sell the drug, and the Department of Revenue starts collecting taxes as soon as March.
Much of the revenue could be in cash, since banks are reluctant to do business with pot dealers without changes in federal policy that treats banking of marijuana proceeds as money laundering.
Handling all those bills presents a hurdle for the state Department of Revenue. But some say a bigger problem would be trying to store and spend the money.
The uncertainty was reflected in last week’s quarterly report from Washington revenue forecasters, who said they wouldn’t count I-502 revenue in their projections until the Liquor Board finishes writing rules and “an agreement is reached with the federal government with respect to the legality of depositing cannabis-sourced tax receipts into state accounts.”
As recently as July, Liquor Board member Chris Marr said not a penny could be deposited without risk of tainting other state money — unless federal authorities took action. Marr has dialed back his alarm but said he would still like clarity from the federal government.
Bank of America has “checked this out with their compliance department and they don’t see it as any different from say, medical marijuana or any other activity,” Assistant Treasurer Wolfgang Opitz said. “There could be other illegal activities going on in this state that happen to be in the tax base.”
Medical-marijuana sellers are not regulated or licensed by the state and they operate in what some see as a legal gray area. But they are supposed to pay sales tax and business tax, which goes into the state’s bank account.
The new I-502 businesses are different. They will be licensed by the state, so revenue collectors can’t plead ignorance of the companies’ business practices. Liquor Board Director Rick Garza said he asked other state officials if the licensing would affect the state’s ability to deposit the revenue. Not necessarily, he was told. Washington is not the first state to license marijuana businesses, and the federal government has never cracked down on states’ bank accounts, Garza said.
The next problem to resolve is marijuana businesses’ inability to bank. Marr worries about the inefficiency of collecting cash and hopes for a resolution.
“We’re really not equipped to accept cash,” he said.
Marr hopes a solution will come now that the U.S. Department of Justice (DOJ) has decided to allow recreational-marijuana sales in Washington and Colorado.
Even if all those questions are answered, it will be hard for forecasters to say how much revenue the state should expect.
If tax rates don’t change, I-502 might bring in between $1.4 billion and $3.2 billion over a decade, consultants told the Liquor Board.