California’s experiment with marijuana legalization is proving extremely popular, but high taxes mean consumers still have a robust appetite for criminal-market cannabis, a new industry report claims.
Eighty-four percent of Californians say they are “very satisfied” with the legal market. However, 18 percent of California marijuana consumers bought cannabis from an unlicensed business or supplier in the last three months, according to the analysis, and say they will do so again as long as taxes remain high.
The report, “The High Cost of Legal Cannabis,” was published on Wednesday by Eaze, a San Francisco-based software company that facilitates marijuana deliveries.
It is also the first such analysis to be published following disappointing, lower-than-expected sales figures in the first few months of California’s legalization era.
California voters legalized recreational marijuana for adults 21 and over on Election Day 2016, and sales at licensed retail outlets began on January 1, 2018.
Earlier this year, Gov. Jerry Brown (D) estimated that excise tax revenue from marijuana sales would total $175 million. The state collected $34 million in excise tax revenue during the first quarter of 2018, leading the state Legislative Analyst Office to predict a lower haul for the year.
With sales and cultivation taxes included, the state collected $60.9 million in marijuana-related tax revenue through the first quarter of 2018, the California Department of Tax and Fee Administration reported in May.
Marijuana purchases in the state are subject to a 15 percent excise tax as well as state sales taxes. Localities like cities and counties can also apply a local tax. With these, on top of a $9.25-per-ounce cultivation tax, taxes on legal cannabis in the state can reach 40 percent or more—the highest in the United States.
And most cities in the state ban commercial marijuana sales outright. According to the San Jose Mercury News, retail cannabis sales are allowed in only one out of every seven cities.
“High prices, taxes, and lack of access to legal cannabis continues to fuel a thriving illicit market,” the Eaze report’s executive summary says. “Simply stated, California has done a good job of telling consumers that cannabis is legal but has a long way to go in making it easy to get safe, legal and affordable cannabis.”
Other findings in Eaze report include:
*Reducing cannabis taxes by 5 percent “could drive 23 percent of illicit market supporters into the legal market.”
*Properly labeled and tested cannabis is popular with 85 and 75 percent of consumers, respectively.
*The most common consumer complaints were high taxes (47 percent), the inability to use credit or debit cards for payment (36 percent) and overpriced products (32 percent).
*The average cannabis user in California is 38 years old. Eighty-five percent of Eaze users are college-educated, and 33 percent are parents.
*And nine out of 10 marijuana consumers say that cannabis has a medical application.
Eaze’s analysis was based on 1,750 online surveys submitted by its users between July 6 and July 12.
Banking Lobby Surveys Members On Problems Serving Marijuana Businesses
The largest group representing U.S. banks is asking its members to share stories demonstrating problems caused by the growing gap between marijuana’s ongoing federally prohibited status and its legalization in an increasing number of states.
In an email announcing the cannabis survey last week, the American Bankers Association (ABA) said that responses will be used by the national organization and its affiliated state bankers associations “to help illustrate to regulators and legislators the need for greater clarity” on the issue.
(Marijuana Moment’s editor provides some content to Forbes via a temporary exclusive publishing license arrangement.)
Canada’s Liquor Stores Will Heavily Outnumber Marijuana Stores On Legalization’s Launch
In case you missed it, Canada’s legal marijuana system goes into effect next week. But new data reveals that access to liquor stores is going to be far greater than planned cannabis store—at least for the time being.
Statistics Canada, a government agency, released the report, which compares the prevalence of liquor stores and planned cannabis stores in each Canadian province, on Wednesday. The team behind the report notes that information about pending private or government-run marijuana shops is incomplete—excepting online retailers, for example.
“Using the agency’s geographic databases, the location of each Canadian household is identified, and the distance from that location to the nearest legal retail outlet is calculated. Averages of these distances are then calculated to determine how generally accessible these products are to Canadians.”
The top-level takeaway is pretty straightforward. Ninety percent of Canadians currently live within 10km (or about six miles) of a liquor store. Only 35 percent of the Canadian population lives within the same distance of a planned cannabis store. Visualized, here’s a look at the access to cannabis and liquor stores based on population density in each province:
Access to liquor stores by province
Population of Canadians with access to a liquor store based on distance.
|1 km||2 km||5 km||10 km||More than 10 km|
|Newfoundland and Labrador||84,776||158,242||265,484||321,357|
|Prince Edward Island||20,498||38,328||77,954||107,592|
Access to planned cannabis stores by province
Population of Canadians with access to a planned cannabis store based on distance.
|1 km||2 km||5 km||10 km||More than 10 km|
|Newfoundland and Labrador||51,424||141,076||274,922||336,714|
|Prince Edward Island||6,907||29,616||59,576||82,626|
“Canadians have remarkably good access to liquor stores all across the country with 90 percent living within 10 kilometers of a store,” the report states. “Not surprisingly, their access to cannabis stores immediately after legalization on October 17, 2018 is likely to be much more restricted with only 35 percent of the population dwelling within 10 kilometers of a store.”
“It is emphasized this is a preliminary estimate based on less-than-full information about the number of stores expected to open and their locations. Cannabis accessibility will undoubtedly increase substantially in 2019 and 2020.”
For a comprehensive breakdown on the differences in marijuana legalization implementation for each province, check out this Marijuana Moment analysis.
Photo courtesy of Brian Shamblen.
Marijuana Stores Will Be Hard To Find For Most Canadians On Day One Of Legalization
One week from today, Canadian adults will be able to purchase marijuana legally across the country. But the number of stores per province and per capita at this point varies widely, an analysis Marijuana Moment conducted shows.
For residents of Canada’s most and least populous provinces, Ontario and Nunavut, respectively, online ordering will be their only means of legal purchase for the foreseeable future. British Columbia, the third-biggest province in the country with 4.8 million residents, has licensed only one store. Meanwhile, Northwest Territories, with only 44,520 residents, will open six government-run stores, or one per 7,420 residents.
(Note: British Columbia omitted for scale, as it has only one store for 4.8 million residents. Ontario and Nunavut will be online sales only on October 17. Population 2017 per Statistics Canada)
While many of even these preliminary licensed locations will not be operational October 17, by federal law, each province must provide an online purchasing system.
And the provinces have committed to opening more physical stores. Manitoba has set a goal that 90 percent of Manitobans have a 30-minute drive or less to a cannabis store. Ontario was supposed to have 40 stores run through the province by now, but when the new provincial government came into power in June, they decided that cannabis stores will be privately owned, so legislators had to go back to the drawing board on regulations.
Alberta hasn’t set a limit for the overall number of private stores in the province, but each locality will be allowed to set a limit for their area. Hundreds of companies have applied to be retailers.
Each province has set up its own rules and regulations regarding minimum age for sales, possession limits and whether residents can grow plants at home.
As with alcohol, the age at which Canadians can purchase cannabis is lower than in the United States. In Quebec and Alberta, 18 year-olds will be able to purchase adult-use marijuana. In every other province, the legal age will be 19. By contrast, in the U.S., every state that has legalized recreational marijuana to date has set the legal age at 21, which is also the legal drinking age in the states.
In most provinces, four plants can be grown in a household. Quebec and Manitoba are prohibiting home growing; Nunavut is not prohibiting personal growing, but has not defined a limit. New Brunswick has specified conditions to allow plants to be grown outdoors (a locked enclosure 1.52 meters high). British Columbia has specified that home plants must not be visible to the public, and won’t be allowed in day-care homes.
The national standard for purchase and public possession for adults is 30 grams of product of any kind. Quebec has set a limit on household possession at 150 grams, but other provinces have not set limits on how much cannabis can be kept in a private home.
What will make up those 30 grams? Flower, oils and, in provinces that are allowing home growing, seeds and plants. The federal legislation prohibits edibles and concentrates at this time.
Public use of cannabis is the policy that varies the most widely from province to province. Most provinces have adopted the stance that smoking or vaping marijuana will be illegal anywhere smoking or vaping tobacco is not allowed. Saskatchewan, Manitoba, New Brunswick and Yukon have banned public use (the regulations of the latter two specify backyard use as well as homes). Alberta and Nunavut have left it up to local governments to set regulations. Ontario and Quebec have set specific locations where it will be illegal to consume, including parks, public spaces and bus shelters.
Every province has passed legislation of some form banning cannabis for drivers in vehicles, but legal limits will differ from province to province. Quebec has adopted a “zero tolerance” policy for all drivers, while Ontario is setting zero tolerance for drivers under 21 years of age as well as commercial drivers. Other provinces are developing systems for how driving while impaired will be determined.
With retail stores spare in Ontario and British Columbia, perhaps Regina, Saskatchewan will become the tourist destination of choice for Americans thinking about crossing the border to experience legalization in their northern backyard. Those tourists should be sure to empty their pockets and car before returning to the United States, as the U.S. Customs and Border Protection has promised to crack down on Canadians and U.S. citizens alike.
Photo courtesy of Christopher Policarpio.