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Legalized Pot Pushes Colorado Revenue Department into New Territory

Enforcement role has tax agency tracking plants with RFID and maybe monitoring safety and 'potency.'

by / January 28, 2014

There’s the one with the police officer holding a marijuana plant. Or the one with buildings in the dense fog (see above). Or the one about Colorado's and Washington’s professional football teams playing in the “Super Bowl.” 

Since Colorado voters legalized marijuana in 2012, pot memes about the Rocky Mountain (High)  State have been good for a laugh and steady streams of clickbait for the sites posting them. The memes play on old stereotypes of silly stoners over-indulging on weed. 

Yet Colorado’s pot vendors have to run highly organized and savvy businesses if they want to sell legally in the state. 

“This isn’t ‘Cheech and Chong,’” said Daria Serna, communications director for the Colorado Department of Revenue (DOR). The DOR, which traditionally focuses on tax policy and collection for the state, has become the lead agency on legalized marijuana enforcement in Colorado. 

“Never in a million years did I think I would know this much about marijuana, but it’s become an important part of our service,” Serna said. “So we’re going to do the best we can, and we hope we can become a model for other states and countries.”

To help blaze this new trail down the legalized pot road, Colorado’s state bureaucracy is turning to trusted technologies to ensure public and consumer safety. 

'Seed-to-Sale' Tracking 

When voters approved recreational cannabis in November 2012, state officials wanted to ensure marijuana plants weren’t stolen, lost or ending up in the hands of criminals or children. 

To help with tracking, Colorado regulators expanded a system that was implemented when the state legalized medical marijuana in the 1990s. Known as the Marijuana Inventory Tracking Solution (MITS), owners of the retail and medical operations must affix radio frequency identification (RFID) tags to plants once they sprout. 

Incarnations of RFID technology have been around for about 50 years, and have been used to track everything from Soviet airplanes to cars passing over toll bridges. 

“RFID is basically seed-to-sale monitoring, a way for us to prevent plant diversion,” Serna said. 

The system allows state regulators to visit a marijuana storehouse, stand a few feet away, and get a complete inventory using a simple Motorola handheld receiver. 

The system is manufactured by Franwell, a central Florida company specializing in tracking devices for agricultural uses. Colorado contracted the marijuana tracking to Franwell for about $1.2 million. 

As for owners and operators, the price of the RFID tags for shop owners ranges from $0.25 to $0.45.  

“Generally, growers find the costs reasonable and are supportive of tracking mechanisms,” said Brian Vicente, executive director of Sensible Colorado, a marijuana advocacy group. “Everything is under camera, so we don’t necessarily agree that theft is an issue, and sometimes the system can be a little clunky. It’s just a tag on the plant. But it’s important at the dawn of this new industry to work with regulators so people know it’s safe.” 

Meanwhile, the demand for Franwell’s RFID tags has been huge, according to a Franwell employee. The company’s been so busy with requests from Colorado, “nobody got a Christmas break,” she said. 

Testing for Safety and Potency

If the number of companies making foods featuring a hearty serving of THC is any indication, the edible market in Colorado is huge and growing. But while pot-laced brownies, lollipops and soda may be popular with consumers, at least one group won’t touch them with a yardstick: U.S. Food and Drug Administration (FDA) regulators.

Because marijuana is considered to be an illegal narcotic by the federal government, FDA officials are steering clear of the edible business in Colorado. That leaves the DOR in the business of food safety and monitoring. 

While marijuana vendors that prepare food items have to follow state and local food safety regulations just like any other café or bakery, Colorado officials believe the FDA is unlikely to spearhead potential foodborne illness investigations involving pot. So the DOR is introducing rules about product testing in July, according to CannLabs CEO Genifer Murray.

Like the RFID technology used to track the plants, Murray said the testing techniques used for edibles have a long history in the food service industry.

“The instrumentation, it’s nothing new,” Murray said. “It’s just that methods that are different. We’ve been looking at plants for a long time, and marijuana is just another plant.”

Murray declined to detail the testing process, other than to say it’s very accurate and fast. But beyond microbial testing for foodborne pathogens, labs like Murray’s also will look to test the potency of edibles so vendors can properly package their product for consumers.

“Especially tourists,” Murray said. “They may not know just how potent edibles are, that if too much is consumed, the highs can last 24 hours or longer. Potency can be horribly detrimental in edibles, so that needs to be clearly labeled.” 

A Cash Business

After pot has been tagged, tracked, analyzed, and finally sold, shop owners are finding themselves with huge bundles of stone-cold cash. But unlike other cash-based businesses, vendors have nowhere to put it. 

That’s because banks, which are federally regulated, won’t take their money.

“It’s not ideal,” said Vicente. “Some banks are coming around, and it seems they might take the money in the near future. But as long as the Department of Revenue accepts it, I think cash will be OK.”

It’s normal for owners to bring the DOR large amounts of cash to pay for fees, licensing and taxes. As a result, the agency has been awash in cash, leaving clerks there to rely on technology first invented almost 100 years ago. 

“We use cash counting machines,” said DOR Spokeswoman Serna. “They hand over the cash, and we put it into a cash counting machine. We look at the total, they look at it, then the state gives them a receipt. …Having cash is not unusual for us, and that will continue until something is done at the banking level.”

For security reasons, Serna declined to comment about what happens to the cash after it’s counted. 

“I can assure you,” she added, “there’s not a big room full of cash just sitting around.”

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John Sepulvado

John Sepulvado is from Southern California. He enjoys writing, reading and wants to take up fishing. He wrote for Government Technology for a short time in 2014.

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