Paper: success of tribal cannabis dependent on tax equity

Working in conjunction with the University of Idaho College of Law, Professor Mark Cowan, J.D. is Director of the Accountancy-Taxation Program at Boise State University where his research interests include the taxation of nonprofits and tax issues in Indian Country. His paper, “Taxing Cannabis on the Reservation,” is forthcoming in the American Business Law Journal.

The current law surrounding the cannabis industry is uncertain. Tax is just one part of this complicated puzzle. Until the federal government acts, the states, the tribes, and the industry must bear the burden of these complexities with as much grace as possible. Since we are at an early stage, now is an opportune time for the three sovereigns to coordinate their efforts and level the tax playing field between on and off reservation sellers. States or tribes should not try to exploit an often ambiguous, unfair, and multi-sovereign tax structure to their advantage. Instead, they should work with their fellow sovereigns to develop a fair and certain tax framework that will allow the cannabis industry to grow. The best strategy for the cannabis industry, including the tribal cannabis industry, is to support these efforts. It is the industry’s stability and growth, fostered by a clear and fair tax system, which—through increased economic development and additional tax revenue—will benefit all the governments involved over the long term. Tax disparities—like cannabis itself—might temporarily alleviate some symptoms, but they won’t cure the underlying ailments. [Cowan, conclusion, American Business Law Journal Volume 57, Issue 4, [xx-xx], Winter 2020]

The US House just passed the Marijuana Opportunity Reinvestment and Expungement Act of 2019 or MORE Act which removes cannabis from Schedule 1 and legalization remains in the hands of the states. The bill's lead sponsor in the Senate is Vice President-elect Sen. Kamala Harris. It's unlikely the bill will pass in the current Senate but after the Georgia runoffs in January Vice President Harris will vote to break a 50-50 tie.

Indian casinos are small banks. It's time for more states to enter cannabis compacts with tribal nations.