Apr 042015
 April 4, 2015
marijuana taxes tax

(via dailyfinance.com)

I have long said that if the black market for marijuana is going to be eliminated, legal marijuana prices have to be lower, or at least close to lower, than prices on the black market. I’m all for paying a bit more at a store, but when someone can get marijuana on the black market for 5 dollars a gram, and it costs 19 dollars a gram at a store, that’s not going to work. That is the case in Washington State, where the tax structure for marijuana is hurting the industry quite a bit. This week the Washington Senate voted to make big changes to the tax structure for marijuana. Per Marijuana Business Daily:

There may be a glimmer of hope for what is widely considered an untenable tax structure in Washington State.

The Washington State Senate passed a bill removing the excise tax on recreational marijuana sales by producers and processors, and will tax only retail sales.

As it stands, a 25% excise tax at three transfer points: when producers sell to processors, when processors sell to retailers, and when retailers sell to end consumers. Business owners in the industry say that tax structure inhibits their ability to do business and drives up prices.

The new bill proposes a one-time tax of 37% on retail sales.

I still think a 37% tax is too high, but that’s less than half of what it is now (25% times 3). I would like to see Washington move to a tax structure like what Oregon is going to have, which should be a flat rate of $35 per ounce. That of course is assuming the Oregon Legislature respects the will of the voters. If that proves to be the case, Oregon would have the lowest marijuana taxes in the country, and would be bordered by Washington which would have the highest.

 

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  39 Responses to “Washington State Senate Votes To Eliminate Marijuana Excise Taxes”

  1.  

    i def am not afraid to pay a tax in return for safety and security but this kind of thinking is a good thing, there has to be a tax of some sort to help persuade, and quite honestly its a good way to help get money back into our towns and schools. finding the balance between too much and too little is the key. like I said id much rather pay a few extra bucks and not have to go through the “shady” black market lol so they are def on the right track.

    •  

      I agree with you Jordan. I don’t mind paying some tax, just not the ridiculous amount that Washington currently imposes. At least this is a step in the right direction, and is a price percentage formula, as opposed to some absurd fixed price per ounce (unlike in Oregon, where their tax seems reasonable for now). I assume that as cannabis becomes more “normalized” and shown not to burden the general population with the supposed harms that we’ve all heard from our government, that the cost to the retail consumer should fall to below the $5/g level for all but “top shelf” product grown hydroponically indoors where the cost to the producer is much higher.

      •  

        Hydro tomatoes cost under $5 a lb. About 32 cents an ounce. A little over a penny a gram.

        Every tax, every regulation comes with it an army of bureaucrats and behind that an army (with guns) of enforcers.

        He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people and eat out their substance.

        No more taxed or regulated than tomatoes.

        •  

          1 dose of Tomatoes = 150g
          1 dose of Cannabis flower = 0.08-0.2g

          1 dose of Tomatoes= $1.50
          1 dose of Cannabis flower = $2.00 at $40/g

          Tomatoes have growing regulations..they just don’t have a excise tax because they are considered good.

          I am far less concerned about Tomato abuse vs Cannabis abuse. Tomatoes do not give you euphoria and make being a lazy loser rewarding. Tomatoes do not make dumb people dumber either or cause non-impaired people to become impaired.

      •  

        WA tax does not stop prices from being low. Oregon tax does because it is flat.

        WA people are taxed on percent of price which they can set to anything. Oregon is taxed $35/oz which translates to absolute minimum of 35×2/.66=$106/oz wholesale.

    •  

      With taxes come an army of tax enforcers. They are called police.

      Every tax, every regulation comes with it an army of bureaucrats and behind that an army (with guns) of enforcers.

      He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people and eat out their substance.

      No more taxed or regulated than tomatoes.

      •  

        Your inflexible approach sounds principled and informed by history, but when we are talking about retail sales of psychoactive bud society will not make your comparison. With it we would never get Cannabis legal again because 90% of parents don’t want their kids consuming buds like they are smokable tomatoes.

        The plant in a garden — sure, it should be a vegetable. We should eat it fresh like spinach. But we’re not there yet, because you can’t explain ‘vegetable’ in garden when the dominant word used to refer to Cannabis is ‘drug.’

      •  

        I understand that side too and wish that could be the case but we cant have it all we have to compromise somewhere, (not that we should have to) but I wouldn’t mind seeing schools getting some more money and if I have to chip in through buying legal marijuana then so be it. just hope your state will allow private grow then it will be no more taxed than tomatoes.

      •  

        Thats because people do not voluntarily share in ways that are not what they want.

        We can’t just pass a law telling Sadam to play nice, it has to be enforced to have meaning.

  2.  

    A 37% tax on the product at retail time? Washington is obviously not thinking this through. If they are still pricing themselves out of the market at a 75% tax what makes them think bringing down taxes by 1/2 is going to be enough to suppress sales prices to the point that they become competitive? 20% and no more is what they are going to have to shoot for if they have any chance to compete with the underground.
    We are not talking about a region where marijuana is difficult to come by, we are talking about the NW which is growing the best in the world and growing a ridiculous amount of it.
    The Washington legislature does not understand the basics of supply and demand? It is a start, but it won’t be enough: rip the band-aid off kids. You missed the mark the first time because you were greedy, don’t let the continued failure linger.

    •  

      Tobacco pays a 50% tax. Alcohol pays $22/gal sprits and $0.04/gal beer.

      Obviously the establishment prefers beer.

      Taxes are going to be higher the easier it is to produce. The tax is meant to reduce consumption and ameliorate the effect of morons being more impaired than usual.

      Ethanol is easier to produce than pot and yet people don’t have that perception…thats because they need time to learn that Ethanol is not premium spirit or beer. The popularity of self production with the idea that anyone can produce high quality outputs is more of an issue than profitability. If consumers preferred qualified producers, no price would support uncertified producers.

      •  

        Your assertion about folks lack of love for quality products is quite true. If there is a similar, less refined, product that has near the same level of THC, that a higher end/well grown product contains, and that poorly produced product has a far lower price point, most consumers will opt for the garbage alternative.

        I am not certain I would agree with the idea that the taxes collected are meant to reduce consumption, thus reducing the number of couch lock morons who try to drive or otherwise endanger the public in some way. I am pretty sure that higher taxes are merely meant to keep the establishment’s coffers full: Altruism, or greater public safety, may be the rhetoric that gets sold to constituencies, but is not the end goal. Those that run governments are just greedy, nothing more.

  3.  

    Oregon–it’s on the west coast, between Washington and California. I can tell you’ve heard of it, because it’s right there in the second paragraph, even if it’s misidentified as the home of the Portland that legalized weed. That would be Portland, Maine.

    But then you’ve forgotten all about us by the third paragraph, where you should find us listed with those other freedom loving states (and whatever label applies to D.C.)..

  4.  

    Wow…2.5 years after the fact and they’re just getting around to this?? Already?? Cannabis wise this state is mess and it’s a great example of how not to do legalization…

    •  

      Got a point

    •  

      Right…this is about the greedy government keeping the commoners from their 24/7 high they are entitled to, and not really about anti-government sentiment amongst heavy users who are in denial about their selves who resent being to expected to have their use be proportional to their abilities.

  5.  

    Actually, the 37% tax rate levied at the point of sale is exactly the same tax being collected now under the three-tier 25% tax. The Washington State Department of Revenue provided the number. The reason 25% + 25% + 25% doesn’t add up to 75% is because marijuana is not priced the same at the wholesale and retail level. (Example: 25% of a $2/g wholesale price = 0.50; 25% of a $10/g retail price is 2.50 –> $3,00 in total tax is 30% of the $10 retail price, not 75%.)

    What’s most important about collapsing the tax structure and re-characterizing the tax as one paid by the consumer rather than the business is the federal tax impact. The IRS code doesn’t allow deduction of business expenses by “drug traffickers.” So, state excise taxes paid by marijuana businesses can’t be deducted. Better to have the consumer pay the tax, and they can only do that at the retail point of sale.

    Oregon’s flat tax of $35 per ounce will be the lowest in the country until the price of a Washington ounce drops to $98. That will happen once the number of licensed retailers creates real competition.

    •  

      1.25X1.25X1.25=1.95+ It is a 95% tax.

      Every tax, every regulation comes with it an army of bureaucrats and behind that an army (with guns) of enforcers.

      He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people and eat out their substance.

      No more taxed or regulated than tomatoes.

    •  

      Your summery is correct but we need to get the gov to sign it and a year to try it out. It it`s still to high priced in the public`s mind everyone will buy from the local Indian res (IMO)

      •  

        Yes…lets work to appease those who contribute the least per person.

        Maybe they need to learn how to self supply (covertly if there are rules against it-just the same as has been for +50years now), or accept that they do not need to get high daily and if they want to do so, maybe earning more might be the proper avenue.

    •  

      The tax will be rather high if the shelf price is low and you consider that the grower is bearing 100% of it.

      Most growers cannot produce stuff that sells for more than $100/oz wholesale (JUST LOOK AT UNTAXED AND MOSTLY UNREGULATED OMMP SHELVES- the only $100/oz out there is shops growing their own or crap outdoor). Only the best outdoor would make that….Outdoor is the only way people will get out of paying the price or producing their own. Outdoor quality is almost never at parity with indoor for a good grow. Outdoor limits the variety of available strains by +70% because most are bred indoors and market for both (which is inappropriate) because stuff that is bred exclusively for outdoor will pull crap in and the same goes for ins.

      Expecting cheap prices and low taxes will cause more monopoly behavior. Growers that retail their own stuff have 50% higher price advantages.

  6.  

    There’s something to be said for the wide variety and (reasonably) predictable supply at a retail marijuana shop. And, really, since 100,000 people have died in the last decade in Mexico because of our Drug War… knowing that all my purchase price goes to local farmers and businesses makes buying at the recreational shops an easy choice for me… even if it’s considerably more expensive. If we would just legalize (all the drugs), all the countries south of us could maybe start back on the path to progress.

    •  

      The Drug War blood will be replaced with court fees..and who has prominence in the market will still be determined by other things than the skill of the grower.

      •  

        Not sure if you’re agreeing or disagreeing (or both)…

        Court fees are a far better policy than the Drug War. And even an imperfect market is far superior to a criminal black market.

  7.  

    $35 is better than $75 and hopefully the
    prices of retail will drop as the taxes end for the growers and processers and it get applied as a retail tax that the customer pays. That is if the old tax scale ends.

    •  

      After you become a career grower and make those sales, then lets talk about what the appropriate price for the consumer is.

      •  

        First of all I would rather have grow your own. Second this artical was about a reduction of taxes. Currantly in the state in the artical the grower pays a tax, the seller pays a tax and the buyer pays a tax. Being so the grower charges the seller for the tax to cover their cost. The seller then has to pay therein own tax and the up charge from the grower. These taxes are passed on to the consumer ( the buyer ) who ends up paying for all the taxes including the sale tax of the buyer. Now if the tax rate changes and is reduced to only the consumer (buyer) than There is no reason to up charge the taxes that no longer exist from the grower to the seller a d only the Bauer has a tax. So naturally being those other taxes don’t exist the price goes cheaper unles your a greedy M.F. and just want to rip people off. So what don’t you get?

  8.  

    The prices at stores will go from $19 a gram to $14. And that is assuming the cost is all tax. The 25% at each stage tax amounts to a 95% tax. 1.25 X 1.25 X 1.25.

    No more taxed or regulated than tomatoes.

    •  

      Your math only makes sense if the price of the product is the same at each step in the supply chain. That’s never the case, with any product. Business costs and profit get added at each step so that the retail price is much higher than the wholesale price.

      Setting aside theory, you just have to ask the state Department of Revenue what tax rate would have to be charged at the retail point of sale to generate the same amount of tax as is currently being collected under the three-tier 25% rate. That what a legislator did, and that’s how 37% got picked for SB 6062 and SB 5467.

      •  

        Actually, they are just trying to equalize with Oregon because its about the same as our $35/oz tax… we happen to be better producers. Our markets will have more quality at lower prices..the higher the tax, the less growers can make it through to shelf and keep the farm. WA’s tax will make the more competetive for low quality beauase its on the retail end. If you tax the grower, it creates a minimum standard which must be met before the product will be considered. This is because people are unlikely to pay $120/oz for lows/mids and $250/oz for top shelf. If they were, the market woudl be mostly capsules- bulk THC production would result in prices similar to Aspirin because its super easy to grow just THC and put it through a refinement vs growing top shelf.

  9.  

    This just involves some math and understanding of human psychology but the tax piggies are blinded by their greed and seem to miss this often.

  10.  

    Good for Washington. Those rates of taxation have to be reduced if the real aim is to integrate ordinary buyers and law-abiding business people into a true free market. You cannot create an open market and end the black one if you tax or regulate too heavily. The word is *access*. If people don’t have reasonable access because of price or because it is too bureaucratic to set up business, then you don’t have an end to prohibition and an open market.

    The legislators are still mostly working from an impression of Cannabis as ‘dangerous drug’ that should be regulated, and I find it funny that heavy taxation seems to soothe their discomforts, at least initially. The only real regulation with any teeth that Cannabis for adults needs is — just as with tobacco and alcohol — keeping it out of the hands of minors (and providing stiff penalties for businesses that violate it: pulling of licenses).

    Oregon’s $35/oz tax seems like a chunk of money until you break it down to the per gram rate: $1.23. Here in OR the OLCC must be watched like a hawk. They have heretofore been a very small, amateurish agency with lots of power unchecked. It can remain that no longer. It should be the most watched agency in the state considering the maneuvering they have been doing behind the scenes.

    •  

      Ya…instead of collecting taxes for the good of society, we should lower prices for those who contribute the least.

      Actual penalties for illegal sales would do better for society..There is no reason competent producers can’t get certified other than the fact that they either are greedy or not actually competent..

      Who is going to sell small amounts for if there is an actual 10 year sentence for unlicensed sales and immunity for “rats?” Shit, we could use the tax to pay informants.

  11.  

    The taxes are not cut in half they are effectively reduced by about 7%. 25% tax at 3 levels does not equal 75% tax on the retail price. Misrepresentations like this create false expectations of significantly lower prices. The prices probably won’t be impacted, the change just makes it so each sale doesn’t result in a loss.

    •  

      People just want to game the system into what ever they think they want…Some will say Gold is worth $1400/oz despite being virtually worthless and mostly position in the ultra wealthy’s safety deposit boxes and out of the other side of their mouths say Cannabis is virtually worthless despite their belief it is practically a pharmacopeia panacea.

  12.  

    I’m sure the black market isn’t fundamentally caused by drug addicts with low incomes and skills insufficient to self supply covertly.

    SURE OF IT

    I was paying $320/oz ten years ago and it was worth it then…guess what $320 = $490 now.

    That means back then in Oregon with decrim and OMMP, they were pulling the equivalent to $490/oz completely unregulated and untaxed…they were noble then my inflamed b-hole!

    5 years after that I sold mostly for $150/oz…back then. now I sell for $125 taxed and regulated, and get called greedy by morons.

  13.  

    Great, the taxes are passed on to us now. The tax was fine before but this excise bullshit is gonna force me and many others back to the black market. This whole thing is going to fail now because prices are not competitive enough. Excise tax is fine for processors and retailers that can afford it, but I will gladly go back to the shitty experience of meeting someone in a parking lot just to avoid it.

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