As California develops its legal marijuana market, the state-regulated system versus federal regulations are causing confusion and red tape for businesses. As a result, some pot cultivation and manufacturing businesses are considering moving onto tribal lands.
The move could off-set some of the federal expenses and taxes that come with operating a marijuana business in California.
Recreational and medical marijuana is legal at a state-level in California, but still illegal on the federal level, complicating tax rates.
“When it comes to federal business taxes for these companies, they are not allowed to write off any expenses because they are not seen as legal,” said Dallin Young, executive director of the Association of Cannabis Professionals. “This is things like product, employees. It comes to thousands and thousands of dollars.”
This cuts into the overall profit margins. Young said the rumor that marijuana businesses are bringing in an abundance of cash just isn’t true.
“After taxation, most marijuana businesses in the state are only seeing profits between three to five percent, which is not that much,” Young added. “Federal tax rates on products or employees would be a lot lower on tribal land.”
But the issue is further convoluted when taking into consideration the sovereignty of American Indian lands: while they are currently seen as sovereign, allowing marijuana businesses on tribal lands could jeopardize this.
“The state has required right now that for tribes to interface with the California commercial cannabis market tribes have to give the state civil jurisdiction over their reservation lands,“ Said Mark Levitan, a tribal attorney based in Sonora, California. “This is an unprecedented demand by the state of California.”
Tina Braithwaite, chairwoman of the Benton Paiute Tribe in Mono County, California, says this is discrimination by the state.
“I feel strongly that if it’s legal for the state it should be legal for the tribes,” said Braithwaite. “By locking out the tribes from the marketplace they force us into a corner and it’s not where we want to be.”
Braithwaite added that for her tribe, located in the central eastern part of the state, being able to get into the marijuana industry would mean economic security.
“We’re a remote tribe and we’re not in the position where we could just pop up a casino,” said Braithwaite. “The cannabis business has helped us to become more economically and developmentally friendly.”
According to southern California tribal attorneys, some tribal lands prohibit marijuana operations altogether, others are trying to reconcile California law with cultivation and manufacturing companies.