Improvements in the process for paying state sales taxes on marijuana

by: Graham Johnson Updated:

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SEATTLE - The process for paying state sales taxes in cash appears to be improving for Washington medical marijuana businesses.

KIRO 7 went along Monday as a medical marijuana business owner remitted around $110,000 in cash he had collected from customers. Ryan Kunkel of Have a Heart, a local medical marijuana business, put the money in a shopping bag and brought it to the Seattle office of the state Department of Revenue. Kunkel says banks won't work with him, despite promises from the U.S. Department of Justice to help remove that barrier.

State voters legalized recreational marijuana. But banks are federally insured and won't work with marijuana businesses because pot remains illegal under federal law. Many marijuana businesses must operate on a cash-only basis, a situation that makes them vulnerable to fraud and violent crime. Kunkel says a bank does allow him to keep cash in a safe deposit box, although his business is not allowed to have an account.

Last summer, when KIRO 7 first reported on Kunkel's effort to pay sales taxes in cash, he said it took state workers two hours to hand-count around $40,000. They did it in full view of everyone in the lobby, and even called Secret Service agents about the authenticity of a $20 dollar bill. On Monday, things were different. Kunkel was escorted into a private room, where workers used a machine that counted the bills quickly and checked their authenticity. "They're a lot of help and it's a lot better than it used to be. They've come a long way," Kunkel said.

Kunkel invited KIRO 7 along to show that there are medical marijuana businesses run legitimately that go out of their way to pay taxes. "There is big group of people doing this right," Kunkel said.

The Department of Revenue says in 2012 it collected $2.3 million in taxes from 85 medical marijuana dispensaries in the state. There are an estimated 200 dispensaries in Seattle. As the state considers doing away with much of the medical marijuana industry when the recreational market comes online, Kunkel wants regulators to give priority in retail licensing to existing medical marijuana companies. He's concerned current legitimate businesses will be edged out in the lottery system. "I would like to not go into a lottery to keep the business I've worked hard to build," Kunkel said.

The Liquor Control Board says it will use a lottery to award retail licenses if the number of applications exceeds the stores allocated for a particular community. No lottery is planned for producers and processors of marijuana.