Census Bureau Announces Another New Move To Collect Marijuana Tax Data From States
The U.S. Census Bureau is announcing another new plan to begin collecting and compiling data on revenue that states generate from legal marijuana.
The latest move—to add a cannabis question to annual reports that states submit—builds upon a separate notice the federal agency posted last month that explained it would be incorporating state-level cannabis tax data in its quarterly reports.
Aside from the difference in timescale—from quarterly to annual—the most recent move also broadens the scope of cannabis-related data being sought from states to include license fees in addition to the earlier notice’s sole focus on sales taxes.
The new notice, published in the Federal Register last week, states that the Census Bureau is making these procedural changes, which also include the collection of information on revenue from sports betting, in order to “modernize the survey’s content to maintain the relevancy and sustainability of these data.”
“The data are released as part of the State and Local Government Finance and Public Employment & Payroll statistical series,” the notice says, adding that these reports are submitted to various federal agencies for informational purposes.
“State and local governments and related organizations, public policy groups, public interest groups, private research organizations, and private sector businesses also use these data,” the Bureau said.
“The Census Bureau developed central collection agreements with state and large local government officials to collect the data from their dependent agencies and report to the Census Bureau as a central respondent… Currently, the Census Bureau has central collection arrangements to collect local government data with 27 states, four local school district governments and state government data from all 50 states.”
A 60-day public comment period will open to solicit feedback on the proposed policy changes, giving people the opportunity to weigh in on the effectiveness of the Bureau’s data collection and ways to streamline the process.
When the Bureau previously announced it would start gathering cannabis tax data for its quarterly reports, legalization advocates said the federal move would help to further legitimize the marijuana industry.
“Now more than ever, we need our policymakers to rely on facts and evidence, not reefer madness rhetoric,” Justin Strekal, political director of NORML, told Marijuana Moment at the time. “If a state or locality wisely chooses to regulate a commercial cannabis marketplace, then it is prudent for data collection efforts to acknowledge it just as it does for other aspects of the legal economy.”
Beyond modernizing the data, reporting on state cannabis tax revenue while marijuana remains federally illegal could further demonstrate to lawmakers the economic opportunities that regulating the plant represents.
Even amid the coronavirus pandemic, marijuana markets in states across the U.S. have generated millions of dollars in tax revenue.
In Illinois, for example, the state saw more than $1 billion in cannabis sales in its first year of implementation. And that’s translated into more than $100 million in tax dollars, portions of which are funding social equity grants and substance misuse and mental health treatment.
The governors of states like Minnesota, New York, Pennsylvania and Wisconsin, among others, have all recognized the economic potential of legalization in their calls for reform.
At the federal level, there’s widespread recognition that the current legal status of marijuana has created complications for financial regulators.
To that end, a top official with the Internal Revenue Service recently participated in an informational webinar to discuss steps the agency is taking to help marijuana businesses stay compliant with their taxes under the umbrella of ongoing federal prohibition.
In September, IRS released updated tax compliance guidance for marijuana firms.
The educational drive also helps to resolve a problem identified by a Treasury Department internal watchdog in April. The Treasury Inspector General for Tax Administration criticized IRS for failing to adequately advise taxpayers in the marijuana industry about compliance with federal tax laws.
Then-Treasury Secretary Steve Mnuchin has brought up the complications caused by the lack of financial services access for the cannabis industry in his calls for a bipartisan legislative fix to the banking issue, noting in congressional hearings that IRS has had to build “cash rooms” to store the deposits.
Legislation to resolve the issue—the Secure and Fair Enforcement (SAFE) Banking Act—repeatedly advanced through the House last session as a standalone bill and as part of broader COVOD-19 relief measures, but it stalled in the GOP-controlled Senate. Industry stakeholders are optimistic that the proposal will clear Congress this year, with Democrats now in control of both chambers.
In the meantime, the number of financial institutions reporting that they service state-legal marijuana businesses has declined, federal data released in November shows.
Marijuana Legalization Could Create $43 Million In Annual Tax Revenue, Delaware State Auditor Reports