The state is short millions of dollars in collected taxes, according to the New Mexico Taxation and Revenue Department, or TRD. Still, state tax officials say the $6.4 million in uncollected taxes through November doesn’t mean the program isn’t “highly compliant.”
The figure comes as the New Mexico cannabis industry has reached a significant milestone: more than $1 billion in recreational cannabis sales, surpassed with the latest November data, according to the state’s track-and-trace system, BioTrack.
However, the uncollected taxes have raised some eyebrows from industry insiders. Some are questioning the cannabis sales figures provided by the Cannabis Control Division, or CCD, and the state’s tax collection efforts. They have also put tax officials on the defensive.
“On average, the gap is about 1 to 3%, which is pretty low (compared to) every other tax program we have,” TRD Deputy Secretary Aysha Mora told the Journal. “This is a pretty highly compliant tax program because it’s electronically filed, electronically paid. … We have a pretty tight grip on it.”
TRD officials didn’t disclose how many cannabis businesses are out of compliance.
Considering New Mexico’s adult-use cannabis sales figures and the associated 12% cannabis excise tax, usually added onto a customer’s final purchase, the state should have collected just over $122 million in taxes from licensed cannabis businesses. According to data provided by TRD, however, it has collected about $115.8 million through November.
Grand totals from distribution reports point to an even larger discrepancy, though Mora noted those reports are about 60 days behind and include tax penalties and interest, among other items. Those monthly reports also don’t account for other factors that make that number fluctuate, including businesses in delinquency or on payment plans.
Cannabis businesses that are in delinquency for over 12 months cannot renew their licenses, Mora said.
“Compliance is high because in order to get your cannabis license renewed by the Regulation andLicensing Department you have to be in compliance with all of your tax filings and payments,” saidBobbie Marquez, a spokesperson with TRD.
Added Mora, “We have seed-to-sale. We have the legislation for (businesses) to comply. All we have to do in that 12-month period is just remind them and nudge them to file and pay. … It’s really streamlined.”
Taxes associated with liquor licenses, for which the department did not provide a gap figure, are also highly compliant because “to get your license renewed, the individual has to be in tax compliance,”said TRD spokesperson Bobbie Marquez.
Duke Rodriguez, president and CEO of Ultra Health, a legacy operator with one of the state’s most significant storefront presences, suggested the state hasn’t been forthcoming about sales data, considering tax data doesn’t match up.
And, he said, the fact that two separate state agencies separately account for collected taxes and sales makes no sense.
CCD’s sales numbers are being “used as a marketing campaign and probably (are) not supported byTRD results,” he added.
He added, “If you don’t pay, you’re like any other illicit, illegal black-market operator. You’re like the homie down the street if you’re not paying your cannabis excise tax and gross receipts tax. You’re not compliant and you’re not lawful, period. And the state does not get the benefit of being able to count it.”
For its part, New Mexico CCD officials told the Journal last month that the division is “not required to report sales information.” It does so because of an “abundance of interest from the public and to provide transparency to the industry, media and other stakeholders,” Brown said.
Brown said the CCD “cannot speculate why excise tax revenues collected by the Taxation andRevenue Department might not align with the sales data received by the CCD via industry self-reporting.” The division “only publishes the data reported into BioTrack from licensed businesses once sales are finalized and reconciled,” Brown said.
At least one other state uses a similar system to New Mexico to determine cannabis sales.
Heather Draper, a spokesperson with Colorado’s Department of Revenue and Marijuana Enforcement Division, told the Journal that the state’s licensed cannabis businesses must enter sales in the state’s seed-to-sale system and maintain records of every transfer of regulated cannabis.Colorado doesn’t use tax-generated data, she said, to determine sales.
But how does TRD track who is and isn’t paying their taxes? Mora said the department uses a “large-scale data warehouse” to check non-compliance for many tax programs.
“We have over 30 data sources in our data warehouse,” Mora said. “We have very complex algorithms for different tax programs to check compliance.”