Mar 022015
 March 2, 2015
marijuana business closing

(image via victorystore.com)

Being a part of the legal marijuana industry is not always profitable. That’s something I have been saying since Washington and Colorado legalized marijuana, and the rush to cash in on the next great American industry started. I was saying it when the growth of the medical marijuana industry started in Western States. A lot of people think that if you open a store or start a garden or invent a marijuana-related product, you will be rich overnight, automatically. That is far from the truth.

The marijuana industry has no guarantees. We are seeing that play out right now in Washington, where one one recently opened recreational marijuana store is going out of business. Stonehenge Cannabis, located in Lyle, Washington, was performing a business practice called ‘bundling’ where someone could purchase marijuana with a marijuana product such as a pipe or lighter. That practice was helping the store get around some harsh 280e provisions in the federal tax code, and was allowing the store to write off some ‘costs of good sold.’ However, that loophole was closed, and combined with the significantly high taxes in Washington for recreational marijuana stores, is just too big of a burden for the store to survive. Per Marijuana Business Daily:

“Before we started bundling in November, we had $5,000 in gross revenue and we wound up with a loss of $1,000 after taxes,” Hallock said. “In January, I think we had a $200 profit.”

Hallock plans to sell whatever inventory she has left in the store, and then close up and re-open in Oregon after that state begins accepting business license applications. She expects to close in another week or two.

Hallock, who is also an attorney, has tried suing the LCB over the bundling prohibition. She has a court hearing scheduled for Friday but doesn’t expect to win.

As an Oregonian, I don’t think the prospects for marijuana stores will be a lot better here compared to Washington. Taxes will be considerably lower, but competition will be significantly higher. Washington capped the number of stores and issued licenses based off of a lottery. Oregon will likely not cap the number of stores, at least not statewide, so the I expect the amount of stores to be very high, and there are only so many dollars to go around. Plus in Oregon people will be able to grow their own marijuana – something that is not allowed in Washington. If you plan on getting into the marijuana industry, whether it’s in Washington, Oregon, or elsewhere, realize that success in the marijuana industry is far from automatic.

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  13 Responses to “Some Recreational Marijuana Stores In Washington Are Struggling”

  1.  

    High taxes is what is killing them. People don’t want to overpay for cannabis and then also pay large taxes on top of it.

  2.  

    This is one way that legislators attempt to ruin this industry. This will always be attacked.

  3.  

    Legalizing marijuana will work but Uncle Sam wants his cut so it also has to be regulated otherwise weed would fly all over this country and the dealers would be making tax free money! That’s y this system won’t work. If u want something special then fine.. I’ll take a trip to the shop if they have sum afghan budda cheese!!! But on the other hand when someone smokes a lot they don’t wanna b going there everyday n spend all that money. Buy a bunch off a drug dealer and u get a better price plus more for ur money.

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      I’m sure the excise taxation on alcohol and cannabis isn’t about trying to reduce consumption and fix problems associated with use..sure

  4.  

    It’s the way the law is structured and the taxes. Marijuana selling is profitable anywhere. Too much red tape is ruining WA State’s legalization law.

  5.  

    Red tapism is always bad be it in any country. It ruins the whole system. Purchasing cannabis drug is not that expensive if you buy it from good medical dispensary.

  6.  

    I never thought the cannabis business would turn into anything but a new way to feed the family, not a gold rush. As research continues, our own research, not big pharma’s I believe medical uses will expand. There is a Black Market so deeply rooted into DC I think there is something wrong with the picture. DC is also smaller than Portland, in area. A far more fair game would have been legalizing Maryland in the same fell swoop. With the Black Market having control of prostitution (a VERY big business in DC), and the cocaine that persuades partying lobbyists into following the very bad plans this country has been under, even under democratic rule.
    If these new young Tea Partiers want something to do, the last thing DC’s accepted black market wants is for them to smoke some green. They can have all the young boys or girls that any pimp can provide, they just do not want them smoking weed. If people think Chicago has a dirty black market, go to DC!!! There is really no safe place and no one who cannot be kept by the black market. Yes, once I could afford a quarter pound (only a few scant years ago) and by dispensary standards today I can’t even afford an ounce. This sickening change can be averted too. Let the states throw out their “no felons” rules and I will begin a grow-op and Dispensary that will never fail. I never knew one, not one illegal salesman that kept his best up front like today’s stores do, there were always those who only wanted the most potent and there were often those in the same grow-op that provided both. So, here we sit with the most new users since 1967 and we are selling them strains that some experienced cancer patients cannot smoke. A friend in Cali agreed with me, these one hit wonders are loosing their appeal; the social aspect is quickly fading and that was the source of the fun. So what if it takes 5 to 10 hits to enjoy, that is what it was once all about; not sneaking home with a gram that puts you in a stay home zone. She even said that she hates inviting people over never knowing if they will be too stoned to stay, if they will throw-up, or fall asleep at the wheel of a car, or at her house. She is facing the same problems as alcohol presents!!! This is coming from a person who has been there since 1997 and has her own choice garden, of her choice of strains, but when people come over she is forced to buy from a store. We should follow the model of the black market because if we did, all states would be down with cannabis. You could consider it our lobby. All you need in DC is black market security and business will blossom. The no felon rules are disgusting, if the laws changed in any given county tomorrow you are a felon, as it is still not declassified, all growers and Dispensaries are committing felony acts at a federal level, but they refuse to hire a felon who has twice the experience to make medical and recreational cannabis work.

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