In the previous post in this series, we discussed the U.S. federal and state tax requirements for international cannabis companies. This post focuses on when a foreign corporation should or must register as a corporation in a U.S. state, either by directly registering its foreign corporation in that state or by establishing a subsidiary or subsidiary in that state.
Other than registering with the US Internal Revenue Service (“IRS”) to meet US tax obligations, the US does not have federal company registrations as registration is at the state level. The criteria for registering in a US state depend on the laws of each state as to when a company is classified as “doing business” in that state. This determination is independent of whether you owe income tax or any other tax based on your US state sales.
For example, in Washington, California, and New Jersey, selling products through a broker or maintaining a bank account with a financial institution is not enough to require registration in those states. However, in order to have more than one bank account, sell products through a broker, or conduct other minimal business activities, you must be registered in the following states:
|Washington (WA)||Yes||When you rent storage space, store products, or repackage products in WA|
|California (CA)||Yes||When you rent storage space, store products, or repackage products in CA.|
|New Jersey (NJ)||Yes||When you rent storage space, store products, or repackage products in NJ|
Every international cannabis company must analyze every part of its US operations to determine if it needs to register to do business in a state.
For example, if you’ve rented warehouse space and stored all of your product on the West Coast in Washington and shipped it to California after it was sold, you don’t need to register in California. The opposite would also be the case if you were to store all of your product on the West Coast in California and ship it to Washington.
However, if you had to retrofit your CA and WA logistics to achieve this, it would likely cost you more in the long run (due to shipping delays and other issues) than registering in every state that you have warehouse space or stores rent product.
Often times, the criteria that a state’s tax office applies to your income and sales tax obligations are different from the criteria that the Department of Commerce or the Secretary of State apply to whether or not the company needs to be registered.
The cost of initial state registration varies from $ 100 to $ 300, and annual compliance for each state varies from a few hundred dollars to tending to be thousands of dollars. The latter extreme costs can be incurred in Delaware. Therefore, use extreme caution when starting a Delaware business so that you can ensure that you are minimizing your annual franchise tax payment.
In general, failing to pay taxes due to severe penalties that can and will be imposed on business owners (not just non-paying businesses) is significantly more serious than failing to register a business. However, it is important to comply with both registration and tax requirements.
Lastly, I need to highlight the US immigration issue for non-US citizens who are somehow involved or considering getting involved in a US marijuana business, be it from their home country or while you are in the US. My colleague Akshat Divatia wrote a warning on a blog post discussing how the involvement of foreigners can cause significant problems with USCIS (US Citizenship and Immigration Services) and USCBP (US Customs and Border Protection). In this post, Akshat wrote:
Even a foreigner who has never used marijuana could be declared inadmissible under the INA [Immigration and Nationality Act] based on his or her involvement in a [U.S.] legal cannabis [marijuana] Business, either as a “knowing helper, advocate, assistant, conspirator or collusion with others” or as an “illegal trafficker” of a controlled substance.
In short, if you are a non-US citizen and think you would like to get in some way in a US state-legal marijuana business and have plans to enter the US, you should contact us contact an immigration attorney In front You come to the USA