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Alaska Cannabis Tax Collection Data for 2018

After Record Sales in October 2018, Alaska Cannabis Sales Leveled Out in November and December

The Alaska Department of Revenue (ADOR) recently posted information on tax collections from the wholesale side of the state’s adult-use cannabis industry for the final quarter of 2018. According to the state’s data, tax revenues and the volume of flower traded wholesale reached record highs in October but subsided in the wake of the fall harvest. Crops generated in the final portion of 2018 appear to have been adequate to meet demand at the time, and then some, as wholesale prices in the state trended downward to close last year, behavior that has persisted into 2019.

The tax collection figures from ADOR state that 122 licensed growers paid a total of $1,841,705 in tax to the state in October, 115 cultivators remitted $1,439,812 in tax in November, and 121 farmers closed 2018 by paying $1,493,903 in tax in December. October’s monthly tax revenues represent a historic high for Alaska’s licensed adult-use market, exceeding the previous record high of over $1.54 million in tax paid by growers in August 2018.

October’s tax collections were up by 24.3% compared to those of the month prior. Receipts from the cultivation tax then dropped by 21.8% month-over-month in November, before rising by 3.8% in December.

October saw 1,904 pounds of flower change hands in the state’s market. Flower trading volume contracted to 1,448 pounds in November, then rose to 1,558 pounds in December.

The volume of trim that was traded declined over the course of Q4 2018. 1,327 pounds were sold by cultivators in October, 1,173 pounds changed hands in November, and 1,030 pounds were moved by growers in December. Cultivators in Alaska pay a flat tax rate of $50 per ounce (or $800 per pound) on wholesale sales of flower and $15 per ounce ($240 per pound) on supply-side deals for trim.

The harvest season for Alaska’s outdoor growers comes earlier than it does for those in the continental U.S., due to the state’s higher northern latitude. Collections from the state’s tax on cultivators peaked in October in both 2017 and 2018. The timing suggests that the bulk of crops are cut down in September, then dried and trimmed – though not necessarily in that order – for sale in October.

ADOR’s monthly reports from Q4 2018 result in complete wholesale trading volume figures for the country’s smallest adult-use cannabis market. Overall in 2018, Alaskan cultivators moved 16,048 pounds of flower and 12,235 pounds of trim. Those volumes are up dramatically from 6,324 pounds of flower and 4,418 pounds of trim that changed hands in the state’s licensed market in 2017. Regulated cannabis sales only began in Alaska in October 2016.

Alaska’s Spot Index generally trended downward over the course of Q4 2018, behavior that has persisted so far this year. For the final quarter of last year, the state’s weekly composite price slid by 8.4% from the beginning to the end of the period. Q4’s mean going rate is off by 4.5% from Q3 2018. Although cultivation tax collections from the early months of this year are not yet available, it appears that last year’s significantly increased output by the state’s growers was enough to meet existing demand at the time and push down supply side rates.

Still, it must be pointed out that the volume of product moved in Alaska’s adult-use market is a fraction of that which changes hands in other states with general legalization. Based on our estimates of the size of state wholesale markets, Nevada saw almost four times the flower trading volume of Alaska in 2018, while Oregon farmers moved over ten times the amount of flower traded in Alaska last year. The size of Alaska’s wholesale adult-use market is more comparable to some states with only medical legalization, such as New Mexico and Rhode Island. We discuss our estimates of the size and value of wholesale markets covered in our reporting in more detail in our upcoming Annual Review & Outlook, to be published in the coming weeks.

Alaska Cannabis Tax Collection Data for 2018 After Record Sales in October 2018, Alaska Cannabis Sales Leveled Out in November and December The Alaska Department of Revenue (ADOR) recently

Marijuana Taxes

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Marijuana Taxes

Marijuana taxes are levied on legal purchases of marijuana. States tax either the consumer purchase (similar to a general sales tax but at higher rates), the transaction between cultivators and distributors or retailers (similar to taxes on alcohol), or both.

Where is marijuana legal and how much revenue do state and local governments raise from taxes on marijuana?

Although prohibited under federal law, marijuana sales for recreational use are legal and taxed in nine states: Alaska, California, Colorado, Illinois, Massachusetts, Michigan, Nevada, Oregon, and Washington. Marijuana is legal in Maine and Vermont but neither state has established its tax system and begun collecting revenue yet. The District of Columbia legalized marijuana in 2014, but Congress prevents the city from regulating and taxing sales.

Colorado and Washington have been collecting marijuana tax revenue since 2014. In calendar year 2018, Colorado collected $267 million and Washington collected $439 million in marijuana tax revenue, or roughly 0.5 percent of state and local general revenue in each state. Four other states reported a full year’s worth of state marijuana tax revenue in 2018: Alaska ($15 million), California ($354 million), Nevada ($87 million), and Oregon ($94, million). All of these totals were less than 1 percent of state and local general revenue. (Please note, none of these totals include local tax revenue.)

Medical marijuana is legal in 33 states and the District of Columbia and some of these states levy a tax on the purchase. However, these tax rates are often the same as or close to the state’s general sales tax rate and do not raise much revenue.

How do marijuana tax rates differ across states?

There are three main ways state and local governments tax marijuana.

Percentage-of-price. These taxes are similar to a general sales tax in that the consumer pays a tax on the purchase price and the retailer remits it to the state. However, like other excise taxes, the tax rate is typically higher than the state’s general sales tax rate. A few states levy their percentage of price tax on the wholesale transaction, not the retail transaction, but it is assumed this cost is then passed on to the consumer in the final purchase price. Some states also let localities levy a percentage of price excise tax, but typically with a maximum rate.

Weight-based. These taxes are similar to cigarette taxes, except instead of taxing per pack of cigarettes the tax is based on the weight of the marijuana product. This tax is levied on the wholesale transaction. States with this type of tax also typically set different rates for different marijuana products. For example, California levies a $9.65 per ounce tax on marijuana flowers, a $2.87 per ounce tax on marijuana leaves, and a $1.35 per ounce tax on fresh plant material. As with other wholesale taxes, it is assumed most of this cost is passed on to the consumer in the final purchase price.

Potency-based. These taxes are similar to alcohol taxes, except instead of taxing drinks with a higher percentage of alcohol at higher rates (i.e., liquor is taxed at a higher rate than beer), the tax is based on the THC level of the marijuana product. Illinois is currently the only state with a THC-based tax. It taxes products with a TCH content of 35 percent or less at 10 percent of retail price and those with more than 35 percent at 25 percent of retail price. All marijuana-infused products (e.g., edibles) are taxed at 20 percent of retail price.

Some states use more than one of these taxes. Additionally, some states and localities levy their general sales tax on the purchase of marijuana in addition to their excise taxes.

Here is each state’s marijuana tax system for 2020:

Alaska: Weight-based taxes of $50 per ounce for flowers, $15 per ounce for stems and leaves, $25 per ounce for immature flowers and buds, and $1 per clone. Localities can also levy a percentage-of-price excise tax.

California: Weight-based taxes of $9.65 per ounce on marijuana flowers, $2.87 per ounce on marijuana leaves, and $1.35 per ounce on fresh plant. Additionally, the state levies a 15 percent excise tax on the retail purchase price, and localities can also levy a percentage-of-price excise tax. Further, the state (7.25 percent) and local governments levy their general sales tax on marijuana purchases.

Colorado: Percentage-of-price tax on both the wholesale transaction (15 percent) and retail transaction (15 percent). Local governments can levy their general sales tax on marijuana purchases.

Illinois: Products with TCH content of 35 percent or less are taxed at 10 percent of retail price and those with more than 35 percent are taxed at 25 percent of retail price. All marijuana-infused products (e.g., edibles) are taxed at 20 percent of retail price. Additionally, all dispensaries pay a 7 percent tax on their gross receipts. Marijuana purchases are also subject to state (6.25 percent) and local general sales taxes.

Maine: Weight-based taxes of $335 per pound of flowers or mature plants, $94 per pound of trim, $1.50 per immature plant or seeding, and $0.35 per marijuana seed. The state will also levy a 10 percent excise tax on the retail sale price of marijuana. (Note: As of April 2020, Maine was not yet collecting marijuana taxes.)

Massachusetts: A 10.75 percent state excise tax is levied on the retail transaction price. Localities can also levy up to a 3 percent excise tax on the purchase price. The state also levies its 6.25 percent general sales tax on marijuana purchases.

Michigan: A 10 percent excise tax is levied on the retail transaction price. The state also levies its 6 percent general sales tax on marijuana purchases.

Nevada: Percentage-of-price tax on both the wholesale transaction (15 percent) and the retail transaction (10 percent). The state (6.85 percent) and local governments also levy their general sales tax on marijuana purchases.

Oregon: A 17 percent excise tax is levied on the retail transaction. Localities can also levy up to a 3 percent excise tax on the retail price.

Washington: A 37 percent excise tax is levied on the retail transaction price. The state (6.5 percent) and local governments also levy their general sales tax on purchases.

How do states use marijuana revenue?

So far, every state that taxes marijuana for recreational use has dedicated at least a portion of the resulting revenue to specific programs:

Alaska sends half of its revenue to its general fund and half to programs aimed at reducing repeat criminal offenses.

California’s revenue pays for administrative costs associated with marijuana legalization, and then uses excess funds for programs related to drug use, including economic development, academic studies, and youth programs.

Colorado’s revenue is dedicated to education programs.

Illinois’s revenue first pays for administrative costs associated with marijuana legalization. Any remaining revenue is then divided among the general fund, programs that supporting criminal justice reform efforts, substance abuse programs, and local government transfers.

Maine, when it begins collecting tax revenue, will evenly split it between public health and safety programs and law enforcement training programs associated with marijuana legalization.

Massachusetts distributes its revenue to various public safety programs.

Michigan’s revenue is divided among education, transportation, and transfers to local governments.

Nevada’s revenue is sent to education programs and its rainy day fund.

Oregon dedicates its revenue to education programs, drug prevention and treatment programs, and transfers to local governments.

Washington dedicates its revenues to health care programs.

State and Local Backgrounders Homepage Marijuana taxes are levied on legal purchases of marijuana. States tax either the consumer purchase (similar to a general sales tax but at higher rates), the transaction between cultivators and distributors or retailers (similar to taxes on alcohol), or both.