Law360 (May 21, 2020, 6:50 PM EDT) -- Cannabis businesses in Los Angeles that are used to paying their city taxes in cash can now pay through online accounts, through a banking agent working with the city to help the underbanked industry during the COVID-19 lockdowns.
More than 300 Los Angeles cannabis companies will now be able to pay city taxes through online accounts. (AP)
While medical or recreational use of cannabis is legal in 33 states, the federal government still restricts it as a Schedule 1 substance, and many financial institutions won't work with the industry for fear of federal prosecution.
Dama Financial, founded in 2016 to work exclusively with the cannabis industry, has bank agency status, connecting banking institutions with cannabis businesses.
The cash-heavy industry of dispensaries, cultivators and growers needed a workaround with COVID-19-related closures, making Dama's CashToTax service appealing to the city's officials.
"The city of Los Angeles Office of Finance is pleased with Dama Financial's ability to support our cash paying cannabis businesses at a time when we are navigating an unprecedented disruption," city Director of Finance Claire Bartels said in a statement. "CashToTax is a convenient payment solution for cannabis license holders to keep their businesses compliant and active."
Los Angeles's pre-pandemic taxpaying methods included credit card, an automated clearing house, or cash by appointment. But since the pandemic closed City Hall to the public, many unbanked cannabis companies have been unable to pay taxes and fees that are due by June 30.
Companies that use the CashToTax service pay the $75 armored truck fee, plus a 2% service fee to Dama Financial, which is lower than the 2.7% credit card processing fee City Hall charges, according to the company.
Dama similarly agreed with Sacramento in March to service its cannabis businesses through the CashToTax service.
While LA and Sacramento are the only cities to officially sign on with the company, cannabis companies in all 50 states can access Dama's CashToTax service, a stripped-down version of the premier business bank account it typically offers.
"Dama Financial is excited to support the city of Los Angeles and its cannabis license holders," Eric Kaufman, Dama Financial's chief revenue officer, said in a statement. "With CashToTax, the city is prioritizing the safety and health of its community, as well as empowering the cannabis related businesses."
--Editing by Brian Baresch.
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