Wednesday, January 20, 2021
Mark J. Cowan (Boise State University), Taxing Cannabis on the Reservation, 57 Am. Bus. L.J. ___ (2020):
American Indian tribes that enter the cannabis industry confront a multi-sovereign tax system that lacks certainty and horizontal equity. The complex interaction of state legalization and taxation of cannabis, federal tax law, the status of tribes as both governments and business enterprises, and the legal and tax landscape in Indian country can give tribes tax advantages and disadvantages compared to off-reservation cannabis dispensaries. This article analyzes these tax issues, examines them in the context of prior challenges posed by Indian gaming, and suggests reforms that address the tax inequities that can result from cannabis sales on Indian reservations.
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.