Blockchain Offers Tax Solution to End California WoesCannabis Tech reached out to Jay Lindberg, CEO of Cangea, to discuss AB 953 and the benefits of the blockchain, not just for businesses, but for the regulatory authority as well.
California isn’t collecting the taxes they expected from legal recreational cannabis sales. Many speculate that the difficulties of paying taxes in a cash-only business could be part of the problem. While some business owners cram thousands of dollars in a duffle bag and drive hundreds of miles to pay their tax bills, the practice is cumbersome, dangerous, and leaves ample room for error.
Last month, California Assembly members Phil Ting and Kevin McCarty, introduced Assembly Bill 953 (AB 953), suggesting the state allow cannabis businesses to pay tax bills via cryptocurrency. If passed, AB 953 promises to provide an alternative to cannabis-based firms in California, by allowing cryptocurrency for tax payments.
Jay Lindberg, CEO of Cangea, understands first-hand how difficult it can be to perform necessary business financial transactions in the cannabis space and set out to simplify the process.
Built Out of Necessity
After entering the cannabis space by designing a mobile app intended for social interaction with cannabis consumers, Jay Lindberg understands the frustrations with banking personally. Despite being a non-plant-touching entity, Lindberg’s operation continued to have issues with payment processors and banking for merely being associated with the cannabis industry. Recognizing that the banking woes affect more than just dispensaries and cultivators, he started looking for a solution.
As his solution started to materialize, Lindberg realized the problem existed on a global scale and envisioned a much wider field of opportunity. While many crypto, blockchain solutions take a stance as being anti-establishment, anti-government, or funding under the table business, Lindberg believes blockchain is the key to standardization and bridging the gap between canna-business and the government.
“The transparency and security provided by crypto and blockchain is the future, not just for cannabis, but for all financial transactions,” Lindberg commented. However, due to the nature of the business, the blockchain for cannabis makes the most sense.
With legalization moving at break-neck speed, it’s only a matter of time before cannabis is legal nationwide. Yet, despite legalization, Lindberg and others in the industry understand that cannabis-based businesses will still be considered ‘high-risk’ accounts. In fact, Lindberg speculates federal legalization may increase the amount of regulation and tracking requirements for cannabis-centric operations and suggests blockchain is a win-win for everyone involved.
Benefits of the Blockchain
With their system, the blockchain uses a series of smart contracts to divide the money collected at the point of sale. So, as the payment comes into the dispensary, all the accounting work is done in real time, splitting the funds into the appropriate accounts such as vendors, commissions, and taxes. Monthly or quarterly tax payments will no longer be necessary, as the state will be able to collect taxes at the point of sale.
Continuing down the chain, government entities could even set up smart contracts to divvy out the tax dollars based on budgeting requirements. For example, a portion of the tax collected could be transferred to the Department of Education, while another amount could go to road repair or other civic function. The blockchain would provide complete automation and total transparency.
“We look at this as a crossroads of two of the fastest growing industries – crypto and cannabis,” Lindberg stated. Further explaining the correlation between the emerging industries, Lindberg said, “People don’t fully understand the benefits of cannabis, and people don’t fully understand the benefits of the blockchain.”
With AB 953, Lindberg believes California is on the right track to deal with the problems, and the bill couldn’t have had better timing. “With more use cases like this one, which makes plain and clear sense, it will act as a catalyst for [blockchain] adoption,” Lindberg predicted.
Continuing to pioneer the industry, the rest of the nation looks to California to learn what’s working and what isn’t. As Lindberg proclaimed, “Cangea’s goal is to integrate with California to help make AB 953 a reality, as well as, provide an easier, frictionless system for everyone in the industry.”
“We want to work with California to make their program one of the best in the nation,” he continued.
Lindberg envisions a much bigger scale of blockchain as legalization grows globally and cannabis and hemp companies begin eyeing an international market. In the long run, the blockchain could certainly be the appropriate technology to handle the complex transactions necessary for importing and exporting raw materials and processed products.
“Our goal is to standardize the cannabis industry and help facilitate the complex transactions a global industry will require,” Lindberg expressed.