Alex Berger, Attorney at Emerge Law Group
Last week we published a blog post on OLCC’s anticipated marijuana retailer tax compliance rule. Yesterday OLCC quietly published a copy of the draft rule, and it appears even more restrictive and severe than originally thought.
As we mentioned, the rule would require all OLCC marijuana retailer “applicants” – as defined by OLCC rules – to submit to OLCC a certificate of tax compliance (“Tax Certificate”) from the Oregon Department of Revenue before OLCC would approve any change of ownership application for a buyer or a renewal application for an existing retailer licensee. The Tax Certificate verifies that the applicant is compliant with all Oregon State tax requirements, including, but not limited to personal income, payroll, business income, and marijuana retail taxes.
The draft rule confirms our earlier concerns and adds some new ones (for all proposed revisions see the complete draft rule):
- Any applicant’s failure to provide a Tax Certificate obtained within 90 days of change of ownership or renewal application results in a determination of “incompletion,” rather than denial and so applicants are not given hearing rights to appeal application rejection;
- The rule is set to become effective and apply to change of ownership applications submitted on and after June 16, 2023 (renewals would only be affected for licenses that expire on or after September 15, 2023);
- The rule disparately affects retailer licensees only, not any other marijuana license type;
- For changes of ownership, both the existing applicants (seller) and new applicants (buyer), must meet the tax compliance requirement for OLCC to approve the application;
- New applicants added to an existing license (change of business structure) must also provide Tax Certificates before OLCC would approve adding them to the license.
Again, we expect that this hastily created rule may have devastating consequences for the already struggling Oregon cannabis industry. Folks who are struggling to make ends meet, and whose most valuable asset may be their retailer license, for example, may be prohibited from selling their business and transferring their license if a single existing applicant on the license is not in compliance with all their individual or business tax obligations; obligations that they may be able to meet if they could sell. Others, who have an existing retail license, and have dutifully paid their marijuana retail tax on time, but have some passive owner behind on their personal income taxes, completely unrelated to cannabis, may have their renewal applications denied. Further, a June 16 effective date leaves potential sellers almost no time to prepare for such a sea change in longstanding OLCC licensing rules and practices. No doubt further unforeseen issues will crop up as OLCC implements the rule.
We’re continuing to analyze the legalities and potential ramifications of the proposed rule and are prepared to respond to your questions or concerns.