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.
Illinois Will ‘Blow Past’ $1 Billion In Legal Marijuana Sales In 2021, Chamber Of Commerce President Says
“Are we going to get to a billion dollars? I think we’re going to blow past the billion dollars based on the experience in smaller states,” the Chamber leader said.
By Elyse Kelly, The Center Square
Illinois’s cannabis industry is growing up fast, with adult-use recreational cannabis sales expected to hit $1 billion by year-end.
In March alone, Illinoisans spent $110 million on recreational marijuana.
Todd Maisch, president and CEO of the Illinois Chamber of Commerce, said one factor contributing to Illinois’ explosive growth is that most neighboring states haven’t legalized marijuana yet.
“What we saw early on in states like Washington and Colorado is they did have demand come in from surrounding states, which frankly benefits our industry and benefits the taxes collected,” Maisch said.
Cannabis sales have already surpassed alcohol’s tax revenues for the state, and Maisch said he thinks $1 billion estimates are conservative.
“Are we going to get to a billion dollars? I think we’re going to blow past the billion dollars based on the experience in smaller states,” Maisch said.
There are only a couple of things that could stop Illinois’ explosive cannabis market growth, Maisch said. He said that policymakers could ruin things by pushing taxes too high as evidenced by the tobacco market.
“As taxes have gone up and up and up, they’ve pushed people all the way into the black market or they’ve created this grey market in which people are ostensibly paying some of the taxes, but they’re still getting sources of tobacco products that avoid much of the tax,” Maisch said.
The other thing that could head off continued growth is other states opening up recreational-use markets.
“So if you start to see surrounding states go to recreational, that’s definitely going to flatten the curve because we’re not going to be pulling in demand from other states,” Maisch said.
Maisch points out some concerns that accompany the explosion of Illinois’s recreational cannabis market including workforce preparedness.
“All of those individuals who are deciding to go ahead and consume this product are really taking themselves out of a lot of job opportunities that they would otherwise be qualified, so there’s a real upside and a downside,” Maisch said.
While it’s easy to track the revenues this industry brings into state coffers, he points out, it will be harder to track the lack of productivity and qualified individuals to operate heavy machinery and other jobs that require employees to pass a drug test.
Missouri Regulators Derail Medical Marijuana Business Ownership Disclosure Effort With Veto Threat
Missouri regulators say they feel requiring medical marijuana business license ownership disclosures under a House-approved amendment could be unconstitutional, and they may urge the governor to veto the legislation.
By Jason Hancock, Missouri Independent
An effort by lawmakers to require disclosure of ownership information for businesses granted medical marijuana licenses was derailed on Thursday, when state regulators suggested a possible gubernatorial veto.
On Tuesday, the Missouri House voted to require the Department of Health and Senior Services provide legislative oversight committees with records regarding who owns the businesses licensed to grow, transport and sell medical marijuana.
The provision was added as an amendment to another bill pertaining to nonprofit organizations.
Its sponsor, Rep. Peter Merideth, D-St. Louis, said DHSS’s decision to deem ownership records confidential has caused problems in providing oversight of the program. He pointed to recent analysis by The Independent and The Missourian of the 192 dispensary licenses issued by the state that found several instances where a single entity was connected to more than five dispensary licenses.
The state constitution prohibits the state from issuing more than five dispensary licenses to any entity under substantially common control, ownership or management.
On Thursday, a conference committee met to work out differences in the underlying bill between the House and Senate.
Sen. Eric Burlison, a Republican from Battlefield and the bill’s sponsor, called the medical marijuana amendment an “awesome idea. I think it’s awesome.”
However, he said opposition from the department puts the entire bill in jeopardy.
“The department came to me,” he said, “and said they felt that this was unconstitutional.”
DHSS has justified withholding information from public disclosure by pointing to a portion of the medical marijuana constitutional amendment adopted by voters in 2018 that says the department shall “maintain the confidentiality of reports or other information obtained from an applicant or licensee containing any individualized data, information, or records related to the licensee or its operation… .”
Alex Tuttle, a lobbyist for DHSS, said if the bill were to pass with the medical marijuana amendment still attached, the department may recommend Gov. Mike Parson veto it.
The threat of a veto proved persuasive, as several members of the conference committee expressed apprehension about the idea of the amendment sinking the entire bill.
Merideth said the department’s conclusion is incorrect. And besides, he said, the amendment is narrowly tailored so that the information wouldn’t be made public. It would only be turned over to legislative oversight committees.
Rep. Jered Taylor, R-Republic, chairman of the special committee on government oversight, said the amendment is essential to ensure state regulators “are following the constitution, that they’re doing what they’re supposed to be doing.”
The medical marijuana program has faced intense scrutiny in the two years since it was created by voters.
A House committee spent months looking into widespread reports of irregularities in how license applications were scored and allegations of conflicts of interest within DHSS and a private company hired to score applications.
In November 2019, DHSS received a grand jury subpoena, which was issued by the United States District Court for the Western District. It demanded the agency turn over all records pertaining to four medical marijuana license applications.
The copy of the subpoena that was made public redacted the identity of the four applicants at the request of the FBI. Lyndall Fraker, director of medical marijuana regulation, later said during a deposition that the subpoena wasn’t directed at the department but rather was connected to an FBI investigation center in Independence.
More recently, Parson faced criticism for a fundraiser with medical marijuana business owners for his political action committee, Uniting Missouri.
The group reported raising $45,000 in large donations from the fundraiser. More than half of that money came from a PAC connected to Steve Tilley, a lobbyist with numerous medical marijuana clients who has been under FBI scrutiny for more than a year.
Colorado Sold More Than Half A Billion Dollars In Legal Marijuana In 2021’s First Three Months
More than $10.5 billion in cannabis has been sold in Colorado since it was legalized in 2014. Those sales translate into over $1.7 billion in tax revenue that goes towards public schools, infrastructure projects and local government programs.
By Robert Davis, The Center Square
Colorado’s marijuana sales eclipsed the half-billion dollar mark in the first quarter of 2021, the state Department of Revenue (DOR) said on Tuesday.
In all, marijuana sales were over $560 million between January and March. More than $10.5 billion in marijuana has been sold in Colorado since it was legalized in 2014.
Those sales translate into over $1.7 billion in tax revenue that goes towards public schools, infrastructure projects and local government programs.
DOR compiles its monthly marijuana sales report by adding the state’s medical and recreational sales together. The total does not include marijuana accessories or any products that do not contain medical marijuana.
Marijuana sales reached $207 million in the month of March alone. In exchange, the state collected $39.6 million in taxes.
Marijuana tax revenue is collected through three state taxes: a 2.9 percent sales tax on marijuana sold in stores, a 15 percent tax on retail marijuana and a 15 percent retail marijuana excise tax.
State law requires 71 percent of the total to be remitted to the marijuana tax cash fund, a budget account that is statutorily required to fund health care, health education, substance abuse prevention and treatment programs and law enforcement.
The remaining 29 percent is then subdivided between the state public school fund and the general fund. Schools receive just over 12 percent of the total while the general fund receives greater than 15 percent.
In April, the public school fund received over $14 million. The account supports school construction projects and is controlled by the School Board Investment Fund, a three-member panel responsible for maintaining the fund’s capital that was established in 2016.
Meanwhile, the marijuana tax cash fund received over $16 million and the general fund received $3.5 million.