As we move ever closer to the world’s tax deadlines (they aren’t all on the same day, but you know, this time of year see’s a lot of them) we are looking at some of the implications cryptocurrency has for tax. Yes, you probably owe tax on your cryptocurrency investments, this was made clear during the start of 2018 which strangely coincided with the cryptocurrency boom. But, did you know that cryptocurrency provides further implications for paying tax against things like cannabis?
Cannabis sales (where cannabis is legal in states in the US) are liable for taxation, though because cannabis is associated as a drug, many banks in the United States refuse to do business with cannabis suppliers and its opening up a minefield of problems for those that need to pay tax. It’s now reached a point that in California, armed vehicles are being used to transfer cannabis because they are having to make large cash payments to councils, instead of letting a bank handle the payment for them. Cryptocurrency could provide a viable solution to this.
Assembly Member for California, Phil Ting has recently introduced a bill that allows cannabis businesses to pay their taxes (to both the county and the city) by using cryptocurrencies, in a bid to make taxation payments easier and safer for those companies, that are actually operating within the law, though the banks seem to fail to recognise that.
Ting has said:
“You have stores with cash and then you have at times warehouses with cash and the amount of cash they have is just very difficult to secure It’s dangerous enough transferring our product around. It makes it doubly dangerous transferring all the cash around.”
“A small cannabis store just like a small storefront. They’re in a residential neighborhood. There are people who live there who are all around. If something happened that was potentially violent or dangerous, there could be repercussions for that neighborhood.”
The bill is yet to be approved, but it could come into force as soon as 2020, allowing cryptocurrency to be used to settle these tax bills.
Why is this beneficial?
This is good for the crypto industry as these cannabis tax payments will require huge cryptocurrency purchases. We can assume that they will pay their tax with Bitcoin and therefore, this means that large cannabis companies will have to start investing in Bitcoin in order to safely pay these taxes. On the surface, this is going to encourage institutional level investment that is likely to spread across the United States. If it grows at the pace the US cannabis industry has, then we could be on to something very special.