The Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), an initiative measure enacted by the approval of Proposition 64 at the November 8, 2016, statewide general election, authorizes the consumption of nonmedicinal cannabis by persons over 21 years of age, referred to as adult-use cannabis, and provides for the licensure and regulation of certain commercial adult-use cannabis activities. The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities.

The Sales and Use Tax Law, which is administered by the California Department of Tax and Fee Administration, requires any person whose estimated tax liability under that law averages $10,000 or more per month to remit amounts due by electronic funds transfer, as provided. That law authorizes, before January 1, 2022, a person issued a sellers permit for a place of business that is a dispensary, as defined in the Medical Cannabis Regulation and Safety Act, which was repealed, to remit amounts due for retail sales at the dispensary by a means other than electronic funds transfer.

This bill, until January 1, 2022, would instead authorize a person licensed under MAUCRSA, whose estimated tax liability under that law averages $10,000 or more per month, to remit amounts due by a means other than electronic funds transfer if the board deems it necessary to facilitate collection of amounts due.

AUMA requires the taxes imposed by AUMA to be administered and collected pursuant to the Fee Collection Procedure Law, as specified. The Fee Collection Procedure Law requires any person whose estimated tax liability under that law averages $20,000 or more per month to remit amounts due by electronic funds transfer, as provided.

This bill, until January 1, 2022, would exempt a person required to pay or collect specified taxes imposed on a person licensed to engage in commercial cannabis activity under MAUCRSA, whose estimated tax liability under that law averages $20,000 or more per month, from the requirement to remit amounts due by electronic funds transfer if the department deems it necessary to facilitate collection of amounts due.

AUMA authorizes the Legislature to amend the act to further the purposes and intent of the act with a ²/₃ vote of the membership of each house of the Legislature, except as provided.

This bill would declare that it furthers the purposes and intent of AUMA for a specified reason.

This bill would declare that it is to take effect immediately as an urgency statute.

The Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), an initiative measure enacted by the approval of Proposition 64 at the November 8, 2016, statewide general election, authorizes the consumption of nonmedicinal cannabis by persons over 21 years of age, referred to as adult-use cannabis, and provides for the licensure and regulation of certain commercial adult-use cannabis activities. The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities.

The Sales and Use Tax Law, which is administered by the California Department of Tax and Fee Administration, requires any person whose estimated tax liability under that law averages $10,000 or more per month to remit amounts due by electronic funds transfer, as provided. That law authorizes, before January 1, 2022, a person issued a sellers permit for a place of business that is a dispensary, as defined in the Medical Cannabis Regulation and Safety Act, which was repealed, to remit amounts due for retail sales at the dispensary by a means other than electronic funds transfer.

This bill, until January 1, 2022, would instead authorize a person licensed under MAUCRSA, whose estimated tax liability under that law averages $10,000 or more per month, to remit amounts due by a means other than electronic funds transfer if the board deems it necessary to facilitate collection of amounts due.

AUMA requires the taxes imposed by AUMA to be administered and collected pursuant to the Fee Collection Procedure Law, as specified. The Fee Collection Procedure Law requires any person whose estimated tax liability under that law averages $20,000 or more per month to remit amounts due by electronic funds transfer, as provided.

This bill, until January 1, 2022, would exempt a person required to pay or collect specified taxes imposed on a person licensed to engage in commercial cannabis activity under MAUCRSA, whose estimated tax liability under that law averages $20,000 or more per month, from the requirement to remit amounts due by electronic funds transfer if the department deems it necessary to facilitate collection of amounts due.

AUMA authorizes the Legislature to amend the act to further the purposes and intent of the act with a ²/₃ vote of the membership of each house of the Legislature, except as provided.

This bill would declare that it furthers the purposes and intent of AUMA for a specified reason.

This bill would declare that it is to take effect immediately as an urgency statute.

The Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), an initiative measure enacted by the approval of Proposition 64 at the November 8, 2016, statewide general election, authorizes the consumption of nonmedicinal cannabis by persons over 21 years of age, referred to as adult-use cannabis, and provides for the licensure and regulation of certain commercial adult-use cannabis activities. The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities.

The Sales and Use Tax Law, which is administered by the California Department of Tax and Fee Administration, requires any person whose estimated tax liability under that law averages $10,000 or more per month to remit amounts due by electronic funds transfer, as provided. That law authorizes, before January 1, 2022, a person issued a sellers permit for a place of business that is a dispensary, as defined in the Medical Cannabis Regulation and Safety Act, which was repealed, to remit amounts due for retail sales at the dispensary by a means other than electronic funds transfer.

This bill, until January 1, 2022, would instead authorize a person licensed under MAUCRSA, whose estimated tax liability under that law averages $10,000 or more per month, to remit amounts due by a means other than electronic funds transfer if the board deems it necessary to facilitate collection of amounts due.

AUMA requires the taxes imposed by AUMA to be administered and collected pursuant to the Fee Collection Procedure Law, as specified. The Fee Collection Procedure Law requires any person whose estimated tax liability under that law averages $20,000 or more per month to remit amounts due by electronic funds transfer, as provided.

This bill, until January 1, 2022, would exempt a person required to pay or collect specified taxes imposed on a person licensed to engage in commercial cannabis activity under MAUCRSA, whose estimated tax liability under that law averages $20,000 or more per month, from the requirement to remit amounts due by electronic funds transfer if the department deems it necessary to facilitate collection of amounts due.

AUMA authorizes the Legislature to amend the act to further the purposes and intent of the act with a ²/₃ vote of the membership of each house of the Legislature, except as provided.

This bill would declare that it furthers the purposes and intent of AUMA for a specified reason.

The Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), an initiative measure enacted by the approval of Proposition 64 at the November 8, 2016, statewide general election, authorizes the consumption of nonmedicinal cannabis by persons over 21 years of age, referred to as adult-use cannabis, and provides for the licensure and regulation of certain commercial adult-use cannabis activities. The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities.

The Sales and Use Tax Law, which is administered by the California Department of Tax and Fee Administration, requires any person whose estimated tax liability under that law averages $10,000 or more per month to remit amounts due by electronic funds transfer, as provided. That law authorizes, before January 1, 2022, a person issued a sellers permit for a place of business that is a dispensary, as defined in the Medical Cannabis Regulation and Safety Act, which was repealed, to remit amounts due for retail sales at the dispensary by a means other than electronic funds transfer.

This bill, until January 1, 2022, would instead authorize a person licensed under MAUCRSA, whose estimated tax liability under that law averages $10,000 or more per month, to remit amounts due by a means other than electronic funds transfer if the board deems it necessary to facilitate collection of amounts due.

AUMA requires the taxes imposed by AUMA to be administered and collected pursuant to the Fee Collection Procedure Law, as specified. The Fee Collection Procedure Law requires any person whose estimated tax liability under that law averages $20,000 or more per month to remit amounts due by electronic funds transfer, as provided.

This bill, until January 1, 2022, would exempt a person required to pay or collect specified taxes imposed on a person licensed to engage in commercial cannabis activity under MAUCRSA, whose estimated tax liability under that law averages $20,000 or more per month, from the requirement to remit amounts due by electronic funds transfer if the department deems it necessary to facilitate collection of amounts due.

AUMA authorizes the Legislature to amend the act to further the purposes and intent of the act with a ²/₃ vote of the membership of each house of the Legislature, except as provided.

This bill would declare that it furthers the purposes and intent of AUMA for a specified reason.

The Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), an initiative measure enacted by the approval of Proposition 64 at the November 8, 2016, statewide general election, authorizes the consumption of nonmedicinal cannabis by persons over 21 years of age, referred to as adult-use cannabis, and provides for the licensure and regulation of certain commercial adult-use cannabis activities. The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities.

The Sales and Use Tax Law, which is administered by the California Department of Tax and Fee Administration, requires any person whose estimated tax liability under that law averages $10,000 or more per month to remit amounts due by electronic funds transfer, as provided. That law authorizes, before January 1, 2022, a person issued a sellers permit for a place of business that is a dispensary, as defined in the Medical Cannabis Regulation and Safety Act, which was repealed, to remit amounts due for retail sales at the dispensary by a means other than electronic funds transfer.

This bill, until January 1, 2022, would instead authorize a person licensed under MAUCRSA, whose estimated tax liability under that law averages $10,000 or more per month, to remit amounts due by a means other than electronic funds transfer if the board deems it necessary to facilitate collection of amounts due.

AUMA requires the taxes imposed by AUMA to be administered and collected pursuant to the Fee Collection Procedure Law, as specified. The Fee Collection Procedure Law requires any person whose estimated tax liability under that law averages $20,000 or more per month to remit amounts due by electronic funds transfer, as provided.

This bill, until January 1, 2022, would exempt a person required to pay or collect specified taxes imposed on a person licensed to engage in commercial cannabis activity under MAUCRSA, whose estimated tax liability under that law averages $20,000 or more per month, from the requirement to remit amounts due by electronic funds transfer if the department deems it necessary to facilitate collection of amounts due.

AUMA authorizes the Legislature to amend the act to further the purposes and intent of the act with a ²/₃ vote of the membership of each house of the Legislature, except as provided.

This bill would declare that it furthers the purposes and intent of AUMA for a specified reason.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1741

Author:(Bonta)

As Amended Ver:June 14, 2018

2/3 vote. Urgency

Original Committee Reference: REV. & TAX.

SUMMARY: Temporarily exempts a person required to pay or collect cannabis excise or cultivation taxes from the requirement to remit amounts due by electronic funds transfer (EFT).

The Senate amendments add an urgency clause so this bill will go into immediate effect.

AS PASSED BY THE ASSEMBLY, this bill:

1. Authorized, until January 1, 2022, a person licensed under the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to remit sales and use tax due by a means other than EFT, if the California Department of Tax and Fee Administration (CDTFA) deems it necessary to facilitate collection.
2. Exempted, until January 1, 2022, a person required to pay or collect cannabis excise or cultivation taxes from the requirement to remit amounts due by EFT if the CDTFA deems it necessary to facilitate collection.
3. Contained legislative findings that this bill furthers the purposes of the Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA) by providing the CDTFA with the authority necessary to collect taxes effectively and efficiently.

EXISTING LAW:

1. Authorizes the consumption of nonmedicinal cannabis by individuals over 21 years of age, referred to as adult-use cannabis, under AUMA.
2. Requires the excise and cultivation taxes imposed by AUMA to be administered and collected under the Fee Collection Procedures Law (FCPL), which requires any person whose estimated tax liability under the law averages $20,000 or more per month to remit amounts due by EFT, as provided.
3. Authorizes the Legislature to amend AUMA to further the purposes and intent of the act with a 2/3 vote of the Legislature, except as provided.
4. Consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities under the MAUCRSA.
5. Requires, under the Sales and Use Tax (SUT) Law, any person whose estimated SUT liability averages $10,000 or more per month to remit amounts due by EFT, as specified. The SUT Law further authorizes, before January 1, 2022, a person issued a seller's permit for a dispensary, as defined in the now-repealed Medical Cannabis Regulation and Safety Act, to remit amounts due for retail sales at the dispensary by a means other than EFT.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS:

1. The author has provided the following statement in support of this bill:

Currently, the State Department of Tax and Fee Administration (CDTFA) collects payments of over $10,000 from businesses via Electronic Funds Transfer (EFT) and imposes a 10% fee on all non-EFT payments.

Since Federal law classifies cannabis as a Schedule 1 drug, most bank and financial institutions do not allow cannabis businesses to open bank accounts. Therefore, most cannabis businesses have no choice but to operate and pay taxes in cash.

This bill will waive the 10% penalty fee imposed on cash payments for cultivation and excise taxes on both medical and adult-use cannabis and waive the penalty for sales and use taxes on adult-use cannabis.

Previous legislation, AB 821 (Gipson) Chapter 811, signed into law in 2016[,] removed the penalty on sales and use taxes of medical cannabis. With Californians enacting Proposition 64, the law needs to be updated to reflect the new taxes created on both medical and adult-use cannabis markets.

This bill will create equity for taxpayers within the cannabis industry by removing an unfair penalty on cash tax payments made to the state.

This bill further incentivizes the cannabis industry to legally comply with California's tax code, which in turn will generate more taxable revenue and further stimulate California's economy.

1. Assembly Revenue and Taxation Committee Comments:
   1. The SUT Law: The SUT Law generally requires any person whose estimated SUT liability averages $10,000 or more per month to remit amounts due by an EFT under procedures prescribed by the CDTFA. Any person remitting taxes by EFT must, on or before the due date of the remittance, file a return for the preceding reporting period.

Except as otherwise provided, any person required to remit SUT who remits those taxes by means other than appropriate EFT must pay a penalty of 10% of the taxes incorrectly remitted.

Before January 1, 2022, any person issued a seller's permit for a dispensary, as defined in now-deleted Business and Professions Code Section 19300.5(n), may remit amounts due for retail sales at the dispensary by a means other than EFT.

This bill would modify this SUT provision by specifying that, until January 1, 2022, a person licensed to engage in commercial cannabis activity under Business and Professions Code Section 26000 et seq. (i.e., MAUCRSA) may remit amounts due by a means other than EFT, if the CDTFA deems it necessary to facilitate collection of amounts due.

• 1. Cannabis taxes: Existing law requires the CDTFA to administer both the cannabis excise tax and the cannabis cultivation tax pursuant to the FCPL. The FCPL, in turn, requires any person whose estimated liability averages $20,000 or more per month to remit amounts due by an EFT. Unlike the SUT Law discussed above, the FCPL provides no exceptions to the mandatory EFT requirements.

This bill would, until January 1, 2022, exempt from this EFT requirement any person required to pay or collect excise or cultivation taxes imposed on a person licensed to engage in commercial cannabis activity under MAUCRSA if the CDTFA deems it necessary to facilitate the collection of amounts due.

• 1. Reason for this bill: This bill addresses the requirement that cash-based cannabis taxpayers make EFT payments even when they are unable to obtain a bank account. Failure to make required EFT payments subjects taxpayers to specified penalties, which the CDTFA can waive if the taxpayer files a request for penalty relief and establishes that the taxpayer's failure to pay as prescribed is due to reasonable cause and circumstances beyond the taxpayer's control.

This bill essentially eliminates the need for cannabis taxpayers to file, and the CDTFA to process, penalty relief requests when the department deems payment by other means (i.e., cash) is necessary for tax collection.

Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0003740

 THIRD READING  

Bill No: AB 1741

Author:

:

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 6-1, 6/13/18

AYES: McGuire, Beall, Hernandez, Hertzberg, Lara, Moorlach

NOES: Nguyen

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 61-12, 5/21/18 - See last page for vote

SUBJECT:

SOURCE: California Cannabis Industry Association

State Board of Equalization Member Fiona Ma

DIGEST:

This bill temporarily authorizes the California Department of Tax and Fee Administration (CDTFA) to allow a person engaged in commercial cannabis activity to remit tax liability due in a method other than an electronic funds transfer (EFT) if CDTFA deems it necessary to facilitate collection

ANALYSIS:

Existing law:

1. Authorizes the consumption of nonmedicinal cannabis by individuals over 21 years of age, referred to as adult-use cannabis, under the Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA).
2. Authorizes the Legislature to amend AUMA to further the purposes and intent of the act with a 2/3^rds vote of the Legislature, except as provided.
3. Consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities under the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA).
4. Requires the excise and cultivation taxes imposed by AUMA to be administered and collected under the Fee Collection Procedures Law (FCPL), which requires any person whose estimated tax liability under the law averages $20,000 or more per month to remit amounts due by EFT, as provided.
5. Requires, under the Sales and Use Tax (SUT) Law, any person whose estimated SUT liability averages $10,000 or more per month to remit amounts due by EFT, as specified.

This bill:

1. Authorizes, until January 1, 2022, a person licensed under MAUCRSA to remit sales and use tax due by a means other than EFT, if the State Board of Equalization deems it necessary to facilitate collection.
   
2. Exempts, until January 1, 2022, a person required to pay or collect cannabis excise or cultivation taxes from the requirement to remit amounts due by EFT if the CDTFA deems it necessary to facilitate collection.
   
3. Contains legislative findings that this bill furthers the purposes of AUMA by providing the CDTFA with the authority necessary to collect taxes effectively and efficiently.
4. Contains an urgency statute that allows the bill to take effect immediately

Background

Federal law prohibits the manufacture, possession, sale, or distribution of cannabis. In 1970, Congress enacted the Controlled Substances Act (CSA), which sets forth five schedules of specified drugs. For a drug to be designated a Schedule I controlled substance, CSA states the substance must have “a high potential for abuse," and have "no currently accepted medical use” in the United States. Federal law lists cannabis as a Schedule I controlled substance.

The Money Laundering Control Act of 1986 made money laundering—the concealment of the origins of illegally obtained money—a federal crime. Financial institutions that conduct financial transactions involving substances explicitly prohibited in CSA, such as cannabis, may have committed money laundering.

Under the Bank Secrecy Act of 1970, financial institutions must assist government agencies in detecting and preventing money laundering: they must conduct sufficient due diligence to adequately assess the risk of doing business with each of its customer. For example, financial institutions must understand its customers’ area of business as well as the nature of its customers’ accounts. They must also report any transaction exceeding $10,000, and any suspicious or illegal activities to the federal Financial Crimes Enforcement Network (FinCEN). If financial institutions do not abide by the Bank Secrecy Act, FinCEN has the authority to seek substantial civil penalties, which often reach well into the millions of dollars, as well as criminal prosecution. Additionally, under the Racketeer Influenced and Corrupt Organizations Act of 1970, the federal government can prosecute all individuals involved in a corrupt organization. This Act subjects all property bought with the proceeds of illegal activity to forfeiture.

On August 29^th, 2013, the U.S. Department of Justice (DOJ) issued the Cole Memo, which provided guidance to federal prosecutors regarding cannabis enforcement. The Cole Memo suggested that the federal government may ignore some CSA violations in states that legalize and regulate marijuana use, such as California. It instructed DOJ attorneys and law enforcement officials to focus certain enforcement priorities such as preventing the distribution of cannabis to minors or preventing the growth of cannabis on public lands. The Cole Memo’s priorities guided the DOJ 's enforcement of CSA relating to cannabis nationwide. However, on January 4^th, 2018, the DOJ rescinded the Cole Memo, which means U.S Attorneys can resume enforcing all federal marijuana laws in states with legalized recreational marijuana use, like California.

Both cannabis cultivation and excise taxes are subject to the Fee Collection Procedures Law (FCPL), which requires taxpayers — who meet certain tax liability thresholds — remit their taxes via electronic fund transmission (EFT). In other words, taxpayers who have $20,000 or more in estimated monthly tax liability must pay via EFT — not cash — or face a 10 percent penalty. However, taxpayers may file for penalty relief if the failure to remit via EFT is due to reasonable circumstances beyond the taxpayers’ control. Taxpayers must file a request for relief after the mandatory penalty is billed, and the request must be signed under penalty of perjury setting forth the facts upon which they base the claim for relief.

Cannabis sales and use tax is subject to California’s Sales and Use Tax Law (SUTL) which — similar to FCPL — also requires certain taxpayers to remit their taxes via EFT. However, taxpayers who have $10,000 or more in estimated monthly tax liability — not $20,000 or more as under FCPL — must pay via EFT. If taxpayers above the threshold pay in a means other than EFT, for example cash, the taxpayers are subject to a 10 percent penalty. Also similar to FCPL, taxpayers may file for penalty relief if the failure to remit via EFT is due to reasonable circumstances beyond the taxpayers’ control.

As a result of cannabis’s illegal status under federal law, many cannabis businesses have been locked out of the banking system. Thus, the cannabis industry cannot get access to bank accounts and must operate their business solely in cash. Without a bank account, cannabis businesses cannot remit their tax liabilities via EFT.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 7/3/18)

California Cannabis Industry Association (co-source)

State Board of Equalization Member Fiona Ma (co-source)

CalAsian Chamber

California Growers Association

Cannabis Distribution Association

CMG/Caliva

Long Beach Collectives Association

Rural County Representatives of California

Southern California Coalition

United Cannabis Business Association

WeDrop

OPPOSITION: (Verified 7/3/18)

None received

ARGUMENTS IN SUPPORT: According to the author, “Currently, the State Department of Tax and Fee Administration (CDTFA) collects payments of over $10,000 from businesses via Electronic Funds Transfer (EFT) and imposes a 10 percent fee on all non-EFT payments. Since federal law classifies cannabis as a Schedule 1 drug, most bank and financial institutions do not allow cannabis businesses to open bank accounts. Therefore, most cannabis businesses have no choice but to operate and pay taxes in cash. AB 1741 will waive the 10 percent penalty fee imposed on cash payments for cultivation and excise taxes on both medical and adult-use cannabis and waive the penalty for sales and use taxes on adult-use cannabis. Previous legislation, AB 821, signed into law in 2016, removed the penalty on sales and use taxes of medical cannabis. With Californians enacting Proposition 64, the law needs to be updated to reflect the new taxes created on both medical and adult-use cannabis markets. AB 1741 will create equity for taxpayers within the cannabis industry by removing an unfair penalty on cash tax payments made to the state. AB 1741 further incentivizes the cannabis industry to legally comply with California's tax code, which in turn will generate more taxable revenue and further stimulate California's economy.”

ASSEMBLY FLOOR: 61-12, 5/21/18

AYES: Acosta, Aguiar-Curry, Arambula, Baker, Berman, Bloom, Bonta, Burke, Caballero, Calderon, Carrillo, Cervantes, Chau, Chávez, Chen, Chiu, Chu, Cooley, Cooper, Cunningham, Daly, Flora, Frazier, Friedman, Gipson, Gloria, Gonzalez Fletcher, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Quirk, Quirk-Silva, Reyes, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Weber, Wood, Rendon

NOES: Travis Allen, Bigelow, Brough, Choi, Fong, Gallagher, Harper, Kiley, Melendez, Patterson, Voepel, Waldron

NO VOTE RECORDED: Dahle, Eggman, Cristina Garcia, Eduardo Garcia, Gray

Prepared by:

7/3/18 17:23:29

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2017 - 2018 Regular

Cannabis: taxation: electronic funds transfer

Temporarily authorizes the California Department of Tax and Fee Administration (CDTFA) to allow a person engaged in commercial cannabis activity to remit tax liability due in a method other than an electronic funds transfer if CDTFA deems it necessary to facilitate collection.

Background

Federal law relating to cannabis. Federal law prohibits the manufacture, possession, sale, or distribution of cannabis. In 1970, Congress enacted the Controlled Substances Act (CSA), which sets forth five schedules of specified drugs. For a drug to be designated a Schedule I controlled substance, CSA states the substance must have “a high potential for abuse," and have "no currently accepted medical use” in the United States. Federal law lists cannabis as a Schedule I controlled substance.

Federal banking laws and money laundering. The Money Laundering Control Act of 1986 made money laundering—the concealment of the origins of illegally obtained money—a federal crime. Financial institutions that conduct financial transactions involving substances explicitly prohibited in CSA, such as cannabis, may have committed money laundering.

Under the Bank Secrecy Act of 1970, financial institutions must assist government agencies in detecting and preventing money laundering: they must conduct sufficient due diligence to adequately assess the risk of doing business with each of its customer. For example, financial institutions must understand its customers’ area of business as well as the nature of its customers’ accounts. They must also report any transaction exceeding $10,000, and any suspicious or illegal activities to the federal Financial Crimes Enforcement Network (FinCEN). If financial institutions do not abide by the Bank Secrecy Act, FinCEN has the authority to seek substantial civil penalties, which often reach well into the millions of dollars, as well as criminal prosecution. Additionally, under the Racketeer Influenced and Corrupt Organizations Act of 1970, the federal government can prosecute all individuals involved in a corrupt organization. This Act subjects all property bought with the proceeds of illegal activity to forfeiture.

State law relating to cannabis. On November 8^th, 2016, California voters approved Proposition 64—the Control, Regulate and Tax Adult Use of Marijuana Act (Act)—which legalized the recreational use of cannabis by adults age 21 and older. The Act provides for the licensure and regulation of commercial adult marijuana activities by various state agencies.

The Act imposes a cannabis excise tax upon purchasers of cannabis or cannabis products sold in this state, equal to 15% of the retail sale’s gross receipts. The initiative establishes a cultivation tax as well at the following rates:

• $9.25 per dry-weight ounce on cannabis flowers, and
• $2.75 per dry-weight ounce on cannabis leaves.

State and local governments also impose sales and use taxes on cannabis, on top of the excise tax and the cultivation tax. The sales and use tax is based upon the retailer's gross receipts. The state sales and use tax rate is equal to 7.25%, and local rates generally add up to an additional 2%.

The Cole Memo. On August 29^th, 2013, the U.S. Department of Justice (DOJ) issued the Cole Memo, which provided guidance to federal prosecutors regarding cannabis enforcement. The Cole Memo suggested that the federal government may ignore some CSA violations in states that legalize and regulate marijuana use, such as California. It instructed DOJ attorneys and law enforcement officials to focus certain enforcement priorities such as preventing the distribution of cannabis to minors or preventing the growth of cannabis on public lands.

The Cole Memo’s priorities guided the DOJ 's enforcement of CSA relating to cannabis nationwide. However, on January 4^th, 2018, the DOJ rescinded the Cole Memo, which means U.S Attorneys can resume enforcing all federal marijuana laws in states with legalized recreational marijuana use, like California.

Fee Collection Procedures Law. Both cannabis cultivation and excise taxes are subject to the Fee Collection Procedures Law (FCPL), which requires taxpayers — who meet certain tax liability thresholds — remit their taxes via electronic fund transmission (EFT). In other words, taxpayers who have $20,000 or more in estimated monthly tax liability must pay via EFT — not cash — or face a 10 percent penalty. However, taxpayers may file for penalty relief if the failure to remit via EFT is due to reasonable circumstances beyond the taxpayers’ control. Taxpayers must file a request for relief after the mandatory penalty is billed, and the request must be signed under penalty of perjury setting forth the facts upon which they base the claim for relief.

Sales and Use Tax Law. Cannabis sales and use tax is subject to California’s Sales and Use Tax Law (SUTL) which — similar to FCPL — also requires certain taxpayers to remit their taxes via EFT. However, taxpayers who have $10,000 or more in estimated monthly tax liability — not $20,000 or more as under FCPL — must pay via EFT. If taxpayers above the threshold pay in a means other than EFT, for example cash, the taxpayers are subject to a 10 percent penalty. Also similar to FCPL, taxpayers may file for penalty relief if the failure to remit via EFT is due to reasonable circumstances beyond the taxpayers’ control.

Assembly Bill 821 (Gipson, 2016) created an exception from the SUTL’s EFT requirement for medical cannabis dispensaries if — at that time —the Board of Equalization deemed it necessary to facilitate the tax collection. AB 821 relieved medical cannabis dispensaries from having to file for penalty relief from the Board of Equalization for non EFT tax payments.

As a result of cannabis’s illegal status under federal law, many cannabis businesses have been locked out of the banking system. Thus, the cannabis industry cannot get access to bank accounts and must operate their business solely in cash. Without a bank account, cannabis businesses cannot remit their tax liabilities via EFT. The author would like to exempt cannabis businesses from the EFT requirement under both FCPL and SUTL.

Proposed Law

Assembly Bill 1741 allows commercial cannabis licensees to remit cannabis excise taxes, cannabis cultivation taxes, and sales and use taxes stemming from cannabis sales by means other than EFT. However, taxpayers must first obtain approval from CDTFA, and the bill only allows this exemption until January 1^st, 2022. The bill also declares it furthers both the purpose and the intent of the Control, Regulate, and Tax Adult Use of Marijuana Act of 2016.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “Currently, the State Department of Tax and Fee Administration (CDTFA) collects payments of over $10,000 from businesses via Electronic Funds Transfer (EFT) and imposes a 10 percent fee on all non-EFT payments. Since federal law classifies cannabis as a Schedule 1 drug, most bank and financial institutions do not allow cannabis businesses to open bank accounts. Therefore, most cannabis businesses have no choice but to operate and pay taxes in cash. AB 1741 will waive the 10 percent penalty fee imposed on cash payments for cultivation and excise taxes on both medical and adult-use cannabis and waive the penalty for sales and use taxes on adult-use cannabis. Previous legislation, AB 821, signed into law in 2016, removed the penalty on sales and use taxes of medical cannabis. With Californians enacting Proposition 64, the law needs to be updated to reflect the new taxes created on both medical and adult-use cannabis markets. AB 1741 will create equity for taxpayers within the cannabis industry by removing an unfair penalty on cash tax payments made to the state. AB 1741 further incentivizes the cannabis industry to legally comply with California's tax code, which in turn will generate more taxable revenue and further stimulate California's economy.”

2. Administrative burden. Currently CDTFA has a process in place to mitigate the 10 percent penalty taxpayers receive for paying in a method other than EFT above specified thresholds. Depending on the taxpayers’ liability, they pay the tax due on either a monthly or quarterly basis. If they are paying in cash because they cannot access a bank account, they go to a CDTFA field office and pay the appropriate amount of cash due. If the cash amount exceeds the applicable threshold, CDTFA immediately charges taxpayers a 10 percent penalty. To fully mitigate the penalty, taxpayers must go online and fill out a form requesting abatement. Once the form is submitted, CDTFA staff files the appropriate paperwork and alleviates taxpayers of the penalty. It’s important to note that taxpayers have to request abatement each time they pay above the applicable threshold. Thus, if taxpayers pay on a monthly basis, this process happens every single month. It’s not only an administrative burden on CDTFA staff, but its cumbersome on taxpayers. AB 1741 allows CDTFA to waive the penalty upfront, freeing up staff for other important work, and gives taxpayers tax relief due to circumstances beyond their control such as not having access to a bank account.

3. Urgency amendment. Regular statutes take effect on January 1^st following their enactment. For example, bills passed in 2018 take effect on January 1^st, 2019. The California Constitution allows bills with urgency clauses to take effect immediately if they're needed for the public peace, health, and safety. The Committee may wish to consider amending AB 1741 to contain an urgency clause to immediately provide tax relief to the cannabis industry and to incentivize cannabis businesses to comply with state tax law.

4. Legislative history. On July 5^th, 2017, the Committee approved AB 948 — which was nearly identical to AB 1741 — by a vote of 6 to 1. The bill was held on suspense in the Senate Appropriations Committee.

5. Related legislation. On April 25^th, 2017, the Committee approved SB 930 (2017, Hertzberg) — the creation of both a limited charter cannabis bank and a limited charter cannabis credit union —by a vote of 6 to 1. The bill is currently pending referral in the Assembly Rules Committee.

6. 2/3^rds vote. The Act — or Proposition 64 — allows the Legislature to amend it with either a simple majority or two-thirds vote, depending on the specific nature of the amendments. If the amendments implement the substantive provisions of the medical cannabis portions or the commercial cannabis regulatory framework of the proposition, or if the amendments further reduce penalties contained in the Act, the Legislature can enact changes by majority vote. Any other amendments require a 2/3rds vote. In all cases, legislative amendments must further the purposes and intent of the Act. Since AB 1741’s amendments to the Act go beyond simply implementation, Legislative Counsel assigned the bill a 2/3rds vote key.

Assembly Actions

Assembly Revenue and Taxation 6-2
Assembly Appropriations 12-4
Assembly Floor 61-12

Support and Opposition

(6/7/18)

Support: State Board of Equalization Member Fiona Ma (Co-Sponsor); California Cannabis Industry Association (Co-Sponsor); Long Beach Collectives Association; United Cannabis Business Association; California Growers Association; Cannabis Distribution Association; CMG/Caliva; Rural County Representatives of California; Southern California Coalition; and WeDrop.

Opposition: Unknown.

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1741

Author:(Bonta)

As Amended Ver:April 25, 2018

2/3 vote

SUMMARY: Temporarily exempts a person required to pay or collect cannabis excise or cultivation taxes from the requirement to remit amounts due by electronic funds transfer (EFT). Specifically, this bill:

1. Authorizes, until January 1, 2022, a person licensed under the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to remit sales and use tax due by a means other than EFT, if the California Department of Tax and Fee Administration (CDTFA) deems it necessary to facilitate collection.
2. Exempts, until January 1, 2022, a person required to pay or collect cannabis excise or cultivation taxes from the requirement to remit amounts due by EFT if the CDTFA deems it necessary to facilitate collection.
3. Contains legislative findings that this bill furthers the purposes of the Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA) by providing the CDTFA with the authority necessary to collect taxes effectively and efficiently.

EXISTING LAW:

1. Authorizes the consumption of nonmedicinal cannabis by individuals over 21 years of age, referred to as adult-use cannabis, under AUMA.
2. Requires the excise and cultivation taxes imposed by AUMA to be administered and collected under the Fee Collection Procedures Law (FCPL), which requires any person whose estimated tax liability under the law averages $20,000 or more per month to remit amounts due by EFT, as provided.
3. Authorizes the Legislature to amend AUMA to further the purposes and intent of the act with a 2/3 vote of the Legislature, except as provided.
4. Consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities under the MAUCRSA.
5. Requires, under the Sales and Use Tax (SUT) Law, any person whose estimated SUT liability averages $10,000 or more per month to remit amounts due by EFT, as specified. The SUT Law further authorizes, before January 1, 2022, a person issued a seller's permit for a dispensary, as defined in the now-repealed Medical Cannabis Regulation and Safety Act, to remit amounts due for retail sales at the dispensary by a means other than EFT.

FISCAL EFFECT: According to the Assembly Appropriations Committee, negligible state costs.

COMMENTS:

1. The author has provided the following statement in support of this bill:

Currently, the State Department of Tax and Fee Administration (CDTFA) collects payments of over $10,000 from businesses via Electronic Funds Transfer (EFT) and imposes a 10% fee on all non-EFT payments.

Since Federal law classifies cannabis as a Schedule 1 drug, most bank and financial institutions do not allow cannabis businesses to open bank accounts. Therefore, most cannabis businesses have no choice but to operate and pay taxes in cash.

This bill will waive the 10% penalty fee imposed on cash payments for cultivation and excise taxes on both medical and adult-use cannabis and waive the penalty for sales and use taxes on adult-use cannabis.

Previous legislation, AB 821 (Gipson) Chapter 811, signed into law in 2016[,] removed the penalty on sales and use taxes of medical cannabis. With Californians enacting Proposition 64, the law needs to be updated to reflect the new taxes created on both medical and adult-use cannabis markets.

This bill will create equity for taxpayers within the cannabis industry by removing an unfair penalty on cash tax payments made to the state.

This bill further incentivizes the cannabis industry to legally comply with California's tax code, which in turn will generate more taxable revenue and further stimulate California's economy.

1. Committee Staff Comments:
   1. The SUT Law: The SUT Law generally requires any person whose estimated SUT liability averages $10,000 or more per month to remit amounts due by an EFT under procedures prescribed by the CDTFA. Any person remitting taxes by EFT must, on or before the due date of the remittance, file a return for the preceding reporting period.

Except as otherwise provided, any person required to remit SUT who remits those taxes by means other than appropriate EFT must pay a penalty of 10% of the taxes incorrectly remitted.

Before January 1, 2022, any person issued a seller's permit for a dispensary, as defined in now-deleted Business and Professions Code Section 19300.5(n), may remit amounts due for retail sales at the dispensary by a means other than EFT.

This bill would modify this SUT provision by specifying that, until January 1, 2022, a person licensed to engage in commercial cannabis activity under Business and Professions Code Section 26000 et seq. (i.e., MAUCRSA) may remit amounts due by a means other than EFT, if the CDTFA deems it necessary to facilitate collection of amounts due.

• 1. Cannabis taxes: Existing law requires the CDTFA to administer both the cannabis excise tax and the cannabis cultivation tax pursuant to the FCPL. The FCPL, in turn, requires any person whose estimated liability averages $20,000 or more per month to remit amounts due by an EFT. Unlike the SUT Law discussed above, the FCPL provides no exceptions to the mandatory EFT requirements.

This bill would, until January 1, 2022, exempt from this EFT requirement any person required to pay or collect excise or cultivation taxes imposed on a person licensed to engage in commercial cannabis activity under MAUCRSA if the CDTFA deems it necessary to facilitate the collection of amounts due.

• 1. Reason for this bill: This bill addresses the requirement that cash-based cannabis taxpayers make EFT payments even when they are unable to obtain a bank account. Failure to make required EFT payments subjects taxpayers to specified penalties, which the CDTFA can waive if the taxpayer files a request for penalty relief and establishes that the taxpayer's failure to pay as prescribed is due to reasonable cause and circumstances beyond the taxpayer's control.

This bill essentially eliminates the need for cannabis taxpayers to file, and the CDTFA to process, penalty relief requests when the department deems payment by other means (i.e., cash) is necessary for tax collection.

Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0002912

Date of Hearing: May 9, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 1741

Author:(Bonta) – As Amended Ver:April 25, 2018

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill allows, until January 1, 2022, commercial cannabis licensees to remit sales and use taxes and cannabis excise and cultivation taxes by means other than electronic funds transfer (EFT). Taxpayers must first obtain approval from the California Department of Tax and Fee Administration (CDTFA).

FISCAL EFFECT:

Negligible state costs.

COMMENTS:

1. Background. Under existing law, taxpayers with monthly sales and use tax liabilities that average $10,000 or more must pay taxes via EFT or face a penalty equal to 10% the tax amount due. AB 821 (Gipson), Chapter 811, Statutes of 2016, created an exception for medical cannabis dispensaries because many banks and credit unions refuse to accept these businesses as customers for fear of legal action.
2. Proposition 64 Taxes. The Control, Regulate, and Tax Adult Use of Marijuana Act (AUMA), enacted when voters approved Proposition 64 in 2016, imposes a 15% excise tax on the gross receipts of any retail sale of marijuana and imposes a cultivation tax of $9.25 per dry-weight ounce on cannabis flowers and $2.75 per dry-weight ounce on cannabis leaves. Unlike the sales and use tax, these two taxes are subject to the Fee Collection Procedures Law (FCPL), which requires taxpayers with an average tax liability of $20,000 or more to remit taxes via EFT or else face a 10% penalty.
3. Purpose. According to the author, AB 1741 will further incentivize the cannabis industry to legally comply with California’s tax code. The author notes that existing provisions allowing taxes on medical cannabis to be paid by means other than EFT should be updated to include cultivation and excise taxes.
4. Related legislation. AB 948 (Bonta), of the 2017-18 Legislative Session, is substantively similar to AB 1741. AB 948 was held on the Senate Appropriations Committee’s Suspense File.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: April 16, 2018

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Autumn R. Burke, Chairwoman

ABPCA Bill Id:AB 1741 (

Author:Bonta) – As Introduced Ver:January 3, 2018

2/3 vote. Fiscal committee.

SUBJECT: Cannabis: taxation: electronic funds transfer

SUMMARY: Temporarily exempts a person required to pay or collect cannabis excise or cultivation taxes from the requirement to remit amounts due by electronic funds transfer (EFT). Specifically, this bill:

1. Authorizes, until January 1, 2022, a person licensed under the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to remit sales and use tax due by a means other than EFT, if the State Board of Equalization (sic) deems it necessary to facilitate collection.
   
2. Exempts, until January 1, 2022, a person required to pay or collect cannabis excise or cultivation taxes from the requirement to remit amounts due by EFT if the California Department of Tax and Fee Administration (CDTFA) deems it necessary to facilitate collection.
   
3. Contains legislative findings that this bill furthers the purposes of the Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA) by providing the CDTFA with the authority necessary to collect taxes effectively and efficiently.

EXISTING LAW:

1. Authorizes the consumption of nonmedicinal cannabis by individuals over 21 years of age, referred to as adult-use cannabis, under AUMA.
2. Requires the excise and cultivation taxes imposed by AUMA to be administered and collected under the Fee Collection Procedures Law (FCPL), which requires any person whose estimated tax liability under the law averages $20,000 or more per month to remit amounts due by EFT, as provided.
3. Authorizes the Legislature to amend AUMA to further the purposes and intent of the act with a 2/3 vote of the Legislature, except as provided.
4. Consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities under the MAUCRSA.
5. Requires, under the Sales and Use Tax (SUT) Law, any person whose estimated SUT liability averages $10,000 or more per month to remit amounts due by EFT, as specified. The SUT Law further authorizes, before January 1, 2022, a person issued a seller's permit for a dispensary, as defined in the now-repealed Medical Cannabis Regulation and Safety Act, to remit amounts due for retail sales at the dispensary by a means other than EFT.

FISCAL EFFECT: Unknown

COMMENTS:

1. The author has provided the following statement in support of this bill:

Currently, the State Department of Tax and Fee Administration (CDTFA) collects payments of over $10,000 from businesses via Electronic Funds Transfer (EFT) and imposes a 10 percent fee on all non-EFT payments.

Since Federal law classifies cannabis as a Schedule 1 drug, most bank and financial institutions do not allow cannabis businesses to open bank accounts. Therefore, most cannabis businesses have no choice but to operate and pay taxes in cash.

AB 1741 will waive the 10 percent penalty fee imposed on cash payments for cultivation and excise taxes on both medical and adult-use cannabis and waive the penalty for sales and use taxes on adult-use cannabis.

Previous legislation, AB 821, signed into law in 2016[,] removed the penalty on sales and use taxes of medical cannabis. With Californians enacting Proposition 64, the law needs to be updated to reflect the new taxes created on both medical and adult-use cannabis markets.

AB 1741 will create equity for taxpayers within the cannabis industry by removing an unfair penalty on cash tax payments made to the state.

AB 1741 further incentivizes the cannabis industry to legally comply with California's tax code, which in turn will generate more taxable revenue and further stimulate California's economy.

1. This bill is sponsored by State Board of Equalization Member Fiona Ma, who notes:

I am proud to sponsor AB 1741 (Bonta), which would remove the 10 percent fee on non-EFT payments over 10 thousand dollars [. . . .] The Legislature passed AB 821 (Gipson) last session, which removed the 10 percent fee on all non-EFT payments over 10 thousand dollars made to State Board of Equalization offices. However, AB 821 only applied to sales and use taxes on medical cannabis, and on November 8, 2016, voters passed Proposition 64, which created a cultivation and excise tax on medical and recreational cannabis. AB 821 doesn't apply to the new taxes imposed by Proposition 64.

1. This bill is supported by the Rural County Representatives of California, which notes the following:
   

We understand the CDTFA has a large number of taxpayers associated with the cannabis industry who face significant tax liabilities – in excess of the statutory threshold for electronic funds transfer payments. The CDTFA should be empowered to create a system that welcomes the fulfillment of large tax obligations in cash. Two years ago, the Legislature enacted Assembly Bill 821 (Gipson) which allowed industry participants operating under the MCRSA (the previous to MAUCRSA) to fulfill their large tax/fee obligations to the BOE in cash with minimal penalty. AB 1741 extends those same opportunities to those industry players operating under the current regulatory scheme.

1. Committee Staff Comments:
   
   1. The SUT Law: The SUT Law generally requires any person whose estimated SUT liability averages $10,000 or more per month to remit amounts due by an EFT under procedures prescribed by the CDTFA. Any person remitting taxes by EFT must, on or before the due date of the remittance, file a return for the preceding reporting period.

Except as otherwise provided, any person required to remit SUT who remits those taxes by means other than appropriate EFT must pay a penalty of 10% of the taxes incorrectly remitted.

Before January 1, 2022, any person issued a seller's permit for a dispensary, as defined in now-deleted Business and Professions Code Section 19300.5(n), may remit amounts due for retail sales at the dispensary by a means other than EFT.

This bill would modify this SUT provision by specifying that, until January 1, 2022, a person licensed to engage in commercial cannabis activity under Business and Professions Code Section 26000 et seq. (i.e., MAUCRSA) may remit amounts due by a means other than EFT, if the board (sic) deems it necessary to facilitate collection of amounts due.

• 1. Cannabis taxes: Existing law requires the CDTFA to administer both the cannabis excise tax and the cannabis cultivation tax pursuant to the FCPL. The FCPL, in turn, requires any person whose estimated liability averages $20,000 or more per month to remit amounts due by an EFT. Unlike the SUT Law discussed above, the FCPL provides no exceptions to the mandatory EFT requirements.

This bill would, until January 1, 2022, exempt from this EFT requirement any person required to pay or collect excise or cultivation taxes imposed on a person licensed to engage in commercial cannabis activity under MAUCRSA if the CDTFA deems it necessary to facilitate the collection of amounts due.

• 1. Reason for this bill: This bill addresses the requirement that cash-based cannabis taxpayers make EFT payments even when they are unable to obtain a bank account. Failure to make required EFT payments subjects taxpayers to specified penalties, which the CDTFA can waive if the taxpayer files a request for penalty relief and establishes that the taxpayer's failure to pay as prescribed is due to reasonable cause and circumstances beyond the taxpayer's control.

This bill essentially eliminates the need for cannabis taxpayers to file, and the CDTFA to process, penalty relief requests when the department deems payment by other means (i.e., cash) is necessary for tax collection.

• 1. Related legislation: AB 948 (Bonta) contains provisions nearly identical to this bill. AB 948 was held on the Senate Appropriations Committee's Suspense File.
  2. Prior legislation: AB 821 (Gipson), Chapter 811, Statutes of 2016, allowed medical cannabis dispensaries to remit SUT by means other than an EFT, until January 1, 2022.
  3. Suggested technical amendments: Committee staff suggests adoption of the following technical amendments:
     1. On page 4, in line 23, strike "board" and insert "department"; and,
     2. On page 4, in line 35, strike "tax" and insert "taxes".

REGISTERED SUPPORT / OPPOSITION:

Support

State Board of Equalization Member Fiona Ma (Sponsor)

California Growers Association

Cannabis Distribution Association

CMG/Caliva

Rural County Representatives of California

Southern California Coalition

WeDrop

Opposition

None on file

Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098