August 8, 2014 in City

Pot taxes top $1 million in first month

Spokane’s second state-licensed pot shop opens
By The Spokesman-Review
 

Despite supply shortages and slower-than-expected retail expansion, Washington’s fledgling marijuana market generated more than $1 million in sales and excise taxes in its first month.

That’s less than half what Colorado took in during its first month of legalized recreational sales but Washington officials say collections are expected to continue growing as more licensed facilities become operational. The number of retail shops open for at least part of each week, for example, has grown from six on opening day last month to about 20 statewide now, while the number of producers and processors has topped 155 with about 1.5 million square feet of production.

“As each day goes by, more and more (licensed operations) are coming into the system,” said Liquor Control Board spokesman Brian Smith.

Among them is Spokane-based Satori, which today became the Inland Northwest’s second state-licensed marijuana retailer to open its doors.

“This is a soft opening,” said owner Justin Wilson, noting that like many retailers he’s struggling with limited availability of state-licensed marijuana and likely will have to keep limited operating hours at first. “We’ve wanted to open so we can get any kinks worked out … and we’ll do a grand opening once we’re able to keep regular hours.”

Located at 9301 N. Division, it’s practically next door to the region’s first pot retailer, Spokane Green Leaf, which has relied primarily on social media to advise potential customers whenever it has enough inventory to open. Both are located just outside Spokane city limits near the North Division Y where U.S Highways 2 and 395 merge.

Spokane Valley could see its first retail outlet by early September, said prospective licensee Justin Peterson, who has had to hunt for a new location after the city adopted local restrictions that rendered his planned store off limits because it’s too close to a recreational trail and future library branch.

The state intends to license 18 retail pot shops across Spokane County, which includes eight within the city of Spokane and three in Spokane Valley. Statewide, regulators will allow 334 retail shops.

In Colorado, the state already had a system of regulating its robust medical marijuana industry, which made the transition to a recreational market quicker.

In Washington, authorities had to build a regulatory system from scratch because it had largely ignored medical marijuana, which voters legalized in 1998. Recreational marijuana use for adults 21 and older was approved by voters in Washington and Colorado in November 2012.

Recreational marijuana in Washington is taxed at several levels. The state assesses a 25 percent excise tax at the production, processing and retail levels, plus requires retailers to collect state and local-option sales tax on final transactions. Moody’s Investor Services says it calculates out to an effective total sin tax rate of about 44 percent.

The state’s early estimates for total marijuana tax revenue ranged from $190 million to $586 million over the first four years of recreational sales, but the industry would have to expand rapidly in the months ahead to reach even the lower projection. Economists at the time warned that reliable information about a legalized recreation marijuana was elusive and that their estimates were basically just guesses.

In the first 30 days of retail operations, the Liquor Control Board said the marijuana industry generated $898,957 in excise taxes. The handful of retailers statewide reported $3.6 million in total sales, which are taxed at 8.5 to 8.7 percent or more depending on the amount of local-option tax assessed.

On the first day of legal retail operations, the six licensed pot shops that opened their doors July 8 reported nearly a quarter of a million dollars in sales. Daily sales dropped to about half that following the opening day, in part because of dwindling inventory, but tend to pick up on Fridays, according to Liquor Control Board figures. Only statewide figures were immediately available.

So far, state and most local authorities have yet to include potential marijuana taxes in their total revenue projections, though that will begin changing next month.

In Olympia, the state’s Economic and Revenue Forecast Council is set to meet in September and will add projected marijuana tax revenue to its next estimate.


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