For many cannabis-related business owners in Southern California, CPA Sonia Luna has been a guardian angel. She is arguably one of the country’s leading experts regarding the complex tax environment of California’s cannabis industry and its broader implication for the IRS. She won the award for Best Accountant at the California Cannabis Awards, which industry insiders have called the event the Oscars of Cannabis. Luna is the founder and CEO of Aviva Spectrum, the “Premier Provider cannabis accounting, internal audit, BlackLine implementations and risk management services on the West Coast.” As an award-winning CPA, her insights and knowledge of federal tax laws have kept many cannabis business owners afloat over the two decades they have been allowed to sell medical cannabis to patients.
Her experience with federal tax laws have kept many cannabis business owners in compliance with new regulations. For more than twenty years, California contended with the ramifications of Proposition 215 (Cal. Health & Safety [H&S] § 11362.5), the law that created the medical cannabis industry in California––most notably how to pay federal income tax. At the federal level, cannabis is a controlled substance and illegal to possess and use; however, medical cannabis dispensaries in California still have to pay taxes on income derived from sales. And in November 2016, California voters passed Proposition 64, making recreational use of cannabis legal at the state level.
Unfortunately, many dispensaries owners cannot utilize the banking system, primarily because the federal government won’t ensure that money derived by cannabis sales will be protected by The Federal Deposit Insurance Corporation (FDIC). As a result, those dispensaries must operate in a way to circumvent federal cannabis laws and find creative ways to pay their income taxes.
As of 2016, there were more than 1,600 dispensaries statewide bringing in “close to $570 million of taxable income each year” (Turner, 2016). Some temporary patches to this banking problem such as getting money orders from the US postal service only help when they need to pay vendors in small amounts of $10,000 or less. Credit unions and banks have in recent years become more lenient in filing types of financial activities. As indicated by a decline in suspicious activity reports (SARs), The Financial Crimes Enforcement Network Indicates an increase in the use credit unions and banking institutions for holding cash shorter than 90 days. The 90-day requirement to file a SAR is a loophole. The recreational market will only make thing worse.
Although Proposition 64 legalized cannabis for recreational use among adults, the state also created the Bureau of Cannabis Control (BCC) to regulate the industry. As of January 2018, the BCC had issued more than 400 licenses to sell recreational cannabis. Luna is at the forefront, showing cannabis businesses how to comply with the California regulatory environment and reporting requirements.
Although she is still active in her executive role at Aviva, Luna is a key advisor for the startup software company Webjoint, a Los Angeles-based company that specializes in cannabis software and point-of-sale (POS) hardware that streamlines the supply-chain accountability required by the BCC. This type of detailed focus on the cannabis industry represents the promise transparency and accountability which California companies are bringing to fight against the federal government’s opposition to recreational cannabis use.
Cannabis-specific information technology will be one part of an Information Governance framework that may be modeled in other states. As California readies itself to manage millions of new tax dollars from the recreational use of cannabis, Sonia Luna is there to help businesses comply with their regulatory compliance requirements.