Washington Pot Taxes Top $70 Million
July 6th, 2015
Policy, Top News
Washington State became the second state in the nation to legalize recreational marijuana, and with about 160 stores open, tax revenue has soared past $1.4 million per day. In total, the state racked up more than $250 million in marijuana sales, including $62 million worth of marijuana excise tax and millions more in local and other taxes. These figures were significantly greater than the state’s $36 million forecast and better than Colorado’s $44 million in its first year.
Unfortunately, the state’s high taxes have left many marijuana businesses struggling to make a profit. In addition to the 25% tax each time marijuana moves from growers to processors to retailers, retailers must pay federal income tax on the marijuana excise tax they pay to the state, since the federal government doesn’t recognize the tax itself. Many retailers insist that they are operating largely for free and without profit.
The good news is that a new law going into effect will cut the state’s three-level excise tax to a single 37% tax. Retailers and growers hope that these efforts will help improve the economics of the industry and help them compete with medical marijuana and illegal marijuana. With prices hitting $30 per gram last summer, an increase in production has helped push the price down to $11.50 per gram these days, which has also helped boost the economics.
Finally, some are concerned that neighboring Oregon could take a bite out of the industry, after its own legalization program went into force. With its lower tax rates, consumers have already been driving across the river to the state’s medical marijuana stores that will be permitted to start selling for recreational use this fall. These dynamics aren’t unlike the migration between the two states for alcohol and tobacco for the same reasons.
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