‘I don’t see how they can succeed’: Several cannabis stores expected to close this year
ANCHORAGE, Alaska (KTUU) - Several cannabis businesses are expected to close this year, according to the Alaska Alcohol and Marijuana Control Office.
Right now there are 164 cannabis stores in the state.
Since legalization in 2016, 109 cannabis businesses — including retail stores and cultivators — have either surrendered or let their licenses expire.
“For this past year we’ve had about double the number of licensees voluntarily select not to renew their licenses,” Joan Wilson the director of the Alaska Alcohol and Marijuana Control Office said.
Wilson says 13 businesses didn’t renew their cannabis licenses last year, and this year it increased to 25.
When asked if she expected more to fail this year, Wilson said, “I don’t see how they can succeed.”
“I would draw a good portion of it to this tax rate that is not for some reason getting absorbed in the consumer price,” Wilson said. “Because that’s what you would expect, right? A high tax is going to then get absorbed in the price the consumer is going to pay. But something is happening with the price that folks can’t do that, they have to keep the price competitive.”
The most common reason blamed for a cannabis business failing is the tax structure, but there are other additional factors, Wilson said — including a saturated market, consumers growing pot plants at home, and lower prices for marijuana and hemp that contain Delta-9. Delta-9 produces a high and can be purchased online or in shops that don’t sell cannabis — and therefore don’t pay the state tax.
Some in the industry have blamed a ‘black market’ for also undercutting profits, which Wilson disputes.
Avoiding paying that state tax also means lost revenue for the state.
Wilson says as a business owner looks at dwindling income, some choose not to pay their taxes — which, so far, is a loss of $3.1 million in tax revenue since legalization.
Right now, Wilson says eight cultivators are behind in their taxes. The one with the largest tab of $275,326 has already had its license renewal denied.
The state Legislature is considering a measure to ease the tax burden. House Bill 119 would shift the state’s marijuana tax system from a tax per ounce to a sales tax.
“The idea of the task force and of the bill is to at least move that tax to the retail level and have it paid by the consumer,” Wilson said.
Instead of using the $50 per ounce tax collected by cultivators, a sales tax would collected by retailers.
“Alaska has, by some estimates, the highest tax rate for marijuana of any legal state right now,” Vice President Trevor Haynes of the Alaska Marijuana Industry Association said.
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