As many marijuana business owners are aware, federal tax compliance is one of the biggest issues faced by this new industry. Understanding and complying with Washington State tax laws, however, is also critical for marijuana business owners.
In June of this year, Washington State enacted the Marijuana Market Reform Bill, which overhauled the state’s system for taxing marijuana businesses. The change from a three tier taxation system to a single 37% marijuana excise tax at the retail level has been a benefit to marijuana producers, processors, and retailers both on the state and federal tax level.
But, what is also important for marijuana business owners to understand is that pursuant to the Marijuana Market Reform Bill marijuana business owners can become personally liable for failing to make timely tax payments. Under the new law, marijuana retailers are responsible for payment of the marijuana excise tax to the state and will be held personally liable for any failure to remit the tax payment.
The new law also provides additional enforcement power to the Washington State Liquor and Cannabis Board to pursue employees, officers, managers, partners and trustees of an insolvent or abandoned business entity that has failed to properly remit marijuana excise taxes to the state. Any “responsible individual” of the business entity may become personally liable for the unpaid taxes of that entity.
It behooves all marijuana businesses to ensure that all taxes (both federal and state) are payed in a timely manner. Taxation of marijuana businesses is a complex area and it is critical that business owners consult with certified public accounts with experience in this unique area.
For more information on the regulation of marijuana businesses, please contact Heather Wolf.