Gov. Tina Kotek announced May 16 that she has directed the Oregon Liquor and Cannabis Commission (OLCC) to increase its regulation of cannabis retail licensees in the state.
Kotek has requested that the OLCC ask retailers to prove state tax compliance before they can obtain a new license or renew an existing one.
The move, which will affect roughly 823 licensees, requires the OLCC and the Oregon Department of Revenue (DOR) to implement a new mandate requiring cannabis retail license applicants to provide regulators with proof of tax compliance as part of the application process.
“I’m grateful to the current leadership at the OLCC and the Department of Revenue for working collaboratively to resolve this long-standing need for equivalent tax compliance across cannabis and liquor sectors,” Kotek said in a public statement. “This will help ensure that all businesses are operating under the same rules and not getting any competitive advantage if they haven’t paid their taxes.”
Oregon law authorizes regulators to ensure tax compliance before issuing some types of licenses, contracts, employment and appointments; the OLCC now plans to extend this process to the cannabis industry by requiring existing cannabis retail licensees or applicants to provide the OLCC with a tax compliance certificate from the DOR before the dispensary licenses will be renewed or issued.
According to Kotek’s office, DOR data shows that cannabis retail licensees have a 9% non-compliance rate for payment of taxes, while other tax programs administered by the DOR have a 3% non-compliance rate.
“We want to help people comply with Oregon’s tax laws,” DOR Director Betsy Imholt said in a public statement. “This is one more opportunity to connect with taxpayers to ensure their taxes are paid. It is good for both Oregon and for the taxpayer.”
The DOR will explore ways to ensure equity in tax enforcement and compliance, including implementing payment plans to help licensees regain compliance and automating the certification process to help meet the increased demand for compliance certificates.
“Oregon’s cannabis industry is important to the state’s economy, and the sales tax it generates is vital to the state’s budget,” OLCC Interim Executive Director Craig Prins said in a public statement. “That’s why it’s critically important for us to get this group of licensees into compliance and paying their fair share.”
Kotek’s announcement regarding cannabis retailers’ tax compliance comes as her spokesperson, Elisabeth Shepard, confirmed this week that Kotek knew of former Secretary of State Shemia Fagan’s cannabis consulting contract before the news became public.
Oregon lawmakers called for Fagan to step down after it was revealed that earlier this year, she had worked for two months as a paid consultant to Veriede Holding LLC, an affiliate of La Mota, which is one of the largest cannabis companies in the state. The contract paid Fagan $10,000 per month with a $30,000 bonus for each new license that Fagan helped the business win in Oregon or New Mexico.
Meanwhile, the Secretary of State’s office was wrapping up an audit of the OLCC; Fagan recused herself from the audit, but first urged her office “to incorporate La Mota CEO Rosa Cazares’s [business] concerns into their work and after the audit was all but finished,” according to Willamette Week, which first reported the news.
Emails released to WW revealed that Cazares had urged Fagan to direct the audit toward specific and personal complaints she had with OLCC regulations.
Fagan ultimately resigned on May 2.
Shepard told KOIN 6 News that Kotek and Fagan met April 19 to discuss Oregon’s legislative session and other topics unrelated to cannabis, and that Fagan briefly mentioned to Kotek that she had recused herself from the OLCC audit due to a consulting contract. Fagan added that she had obtained an opinion on the matter from the Oregon Government Ethics Commission.
Shepard said Kotek did not know the specific details of the contract or Fagan’s business relationship with La Mota until the information came to light in the press, and that Kotek “subsequently expressed her deep disappointment and dismay to Secretary Fagan upon learning those details.”
Kotek called for an investigation April 29 into a potential conflict of interest regarding Fagan’s contract with La Mota, KOIN reported.
“It’s critical that Oregonians trust their government,” Kotek said in a statement to the news outlet. “That is why I am urging the Oregon Government Ethics Commission to immediately investigate this situation. … I let [Fagan] know that I think it’s important to have an expedited review of not only the audit, but any ethics complaints so we can get to the bottom of this. I think Oregonians deserve to know the details.”
