Oregon regulators are launching a crackdown on the cannabis industry, commencing with targeted actions against tax delinquents.
Kent Anderson
Eugene Oregon Tax Attorney
While much attention has been focused on the prolonged session of the Oregon Legislature due to the Senate Republican walkout, another state government body has been in the spotlight – the Oregon Liquor and Cannabis Commission (OLCC). Responsible for regulating the state’s alcohol and marijuana sectors, the OLCC has faced several controversies over the past year.
One significant scandal, known as “Bourbongate,” involved OLCC officials setting aside rare, highly-regulated liquor bottles for personal use. This led to the resignation of the OLCC’s director and board chair. Another controversy emerged when then-Secretary of State Shemia Fagan accepted a consulting job with a subsidiary of the influential cannabis company La Mota, while her office was overseeing an OLCC audit. Following public scrutiny, Fagan resigned.
Eugene Oregon Tax Attorney
Prior to these events, concerns arose about La Mota’s tax payments. The company’s owners, Rosa Cazares and Aaron Mitchell, along with their controlled companies, were reported to owe more than $7 million in taxes, as revealed by the Oregon Department of Revenue and the federal Internal Revenue Service. Additionally, they were behind on payments to their vendors, while simultaneously donating substantial sums to Oregon Democratic campaigns.
In response to the tax delinquency issue, Governor Tina Kotek has taken action, ordering the OLCC and Department of Revenue to require proof of compliance with the state’s tax laws for anyone seeking a retail cannabis license. Businesses out of compliance must establish a payment plan with the state to qualify for license renewal. Data from the Department of Revenue indicates that approximately 9% of cannabis retailers are not in compliance, higher than other regulated programs which average about 3%.
Eugene Oregon Tax Attorney
The cannabis industry is a significant contributor to Oregon’s economy, generating $311 million in tax revenue during the 2019-21 biennium, with recreational sales reaching a record high of $1.18 billion in 2021. Nationally, despite its federal illegality, cannabis sales are projected to reach a total economic impact of $99 billion in 2022 and are expected to grow to $155 billion by 2026.
Despite the industry’s potential, cannabis businesses in Oregon are currently facing challenges. Competition is fierce, and prices have dropped considerably, leading some businesses to struggle. The federal illegality of cannabis poses additional obstacles, making it difficult for some businesses to meet their tax obligations.