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Oregon won’t issue licenses to cannabis dispensaries that owe back taxes, Kotek says

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The change follows reporting of one troubled chain that was allowed to expand despite racking up a big debt.

Anyone hoping to run a cannabis dispensary in Oregon will be required to prove they’ve paid their state taxes before receiving a license or having an existing license renewed, under changes announced by Gov. Tina Kotek on Tuesday.

That’s already a step that some Oregon agencies take before issuing licenses. But the Oregon Liquor and Cannabis Commission doesn’t currently check to make sure applicants for cannabis retail licenses don’t have unpaid taxes, despite a higher percentage of nonpayment among cannabis businesses.

The lack of tax accountability has gotten attention in recent months, following reportingby Willamette Week that one large cannabis chain, La Mota, was allowed to expand across Oregon even as it racked up more than $1.5 million in unpaid state taxes.

The owners of that chain, Rosa Cazares and Aaron Mitchell, became embroiled in scandal after news they’d hired then-Secretary of State Shemia Fagan as a consultant prompted her to resign. They’ve also been significant political donors to Kotek and other Democrats.

Kotek’s announcement Tuesday didn’t mention the troubled dispensary chain by name. And far more businesses than La Mota could be impacted by the policy change. The state currently has 823 retail licensees, and the Department of Revenue says 9% of cannabis dispensaries owe back taxes to the state.

According to the state’s Office of Economic Analysis, part of the problem has to do with the oversupply of recreational marijuana in the state, which has cratered prices dispensaries can demand. Cheaper marijuana for consumers means business owners aren’t making as much.

“Actual tax collections are considerably below expectations based on actual sales as firms struggle with profitability in the market, leading to rising tax delinquencies,” the office said in a February revenue forecast. “It’s a complicated picture of businesses struggling with market conditions, and being unable to pay all their bills.”

The unpaid taxes pose a problem for state coffers, which rely on cannabis revenues to pay for addiction services and education, among other things.

“Oregon’s cannabis industry is important to the state’s economy, and the sales tax it generates is vital to the state’s budget,” Craig Prins, interim director of the OLCC, said in a statement. “That’s why it’s critically important for us to get this group of licensees into compliance and paying their fair share.”

It’s not clear when marijuana licensees might actually need to demonstrate compliance. Kotek said she’s directing the OLCC to work with the Department of Revenue to create a “certificate of tax compliance” applicants can submit when looking for a new or renewed license to operate a dispensary. Licenses must be renewed annually under state law.

“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,” Kotek said in a statement Tuesday.

The OLCC and Department of Revenue planned to hold a joint press conference Tuesday afternoon to discuss the change. According to an FAQ from the agencies, the OLCC will begin crafting rules licensees must follow this year.

Copyright 2023 Oregon Public Broadcasting. To see more, visit Oregon Public Broadcasting.

Dirk VanderHart is JPR's Salem correspondent reporting from the Oregon State Capitol. His reporting is funded through a collaboration among public radio stations in Oregon and Washington that includes JPR.