Marijuana board asks lawmakers to remove flat-tax on pot

Published: Jan. 31, 2018 at 4:04 PM AKST
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It could soon cost a bit less for pot users to buy marijuana. The Alaska Marijuana Control Board has requested that lawmakers take another look at the tax laws regarding marijuana.

The Marijuana Control Board approved a motion to send a resolution to the legislature requesting that the tax structure be altered from a flat rate to a percentage collected at retail sale for the following reasons:

  • With a flat tax, prices for marijuana and marijuana products can only go so low
  • Prices may not be able to compete with the black market
  • Licensees will go out of business because they can’t recoup their costs when oversupply forces prices down
  • A percentage of retail tax allows wholesale prices to be flexible

The board did not suggest a percentage for the tax.

According to Bruce Schulte, former chair of the board, the current excise tax of $50 per oz. ($800 per lb.) on "flower" that was established in the voter initiative, can only be changed by the Legislature. That part isn't likely to change in 2018.

What the initiative failed to adequately account for was the market demand for very high-quality flower - with a lower-quality product finding few buyers amongst the retail stores. There's also a lesser tax on "Trim," the lower-grade byproduct of the harvest process. The initiative allowed the department of Revenue to establish a lesser tax on this part of the plant.

The Marijuana Control Board, in November 2015, adopted a resolution recommending a "Trim Tax" of $10 per ounce, but the Department of Revenue instead imposed a tax of $15 per ounce. Schulte says that it's unlikely that the Legislature will revisit the excise tax this year but the Department of Revenue could make a huge change for the better by returning to the $10 / ounce tax originally recommended, and by allowing lower-quality flower to be sold to processors only at the lower tax level.

"The bad news is what's happening in other states as more cultivators come online there's greater supply, the prices start to drop and we're starting to see happening in Alaska right now. There's not a crisis yet, but there's increased concern that it could become a problem," Schulte said.

And complicating it even more for marijuana retailers in other areas, the cost per ounce for producing marijuana is higher than what retailers can sell it for. Adding a flat tax on top of that price makes their marketing challenges even tougher.

"In the past couple of years we've seen prices in Washington dip below $1,000 per pound. Well, it cost $1,400 to produce but you can only sell it for $1,000 per pound, but you're $400 in the hole for every pound that you produce, so that begins to give you an idea of where the concern is," said Schulte.

The Alaska Marijuana Control board will meet again in April to discuss additional taxing changes.