The 25 percent sales-tax break enjoyed by Oregon’s recreational cannabis consumers effectively ends Monday January 4, marking a new era in the state’s approach to marijuana.
The temporary, tax-free sale of recreational marijuana began in the Beaver State on Oct. 1 at the state’s medical marijuana dispensaries, which number over 250.
The tax is tied to preparations by the Oregon Liquor Control Commission — the state agency tasked with recreational marijuana regulations — to open stores throughout the state. Upon the opening of the recreational retail outlets licensed by the commission in late 2016, a permanent 17 percent sales tax will be imposed in the place of the 25 percent.
There are plans to make the year’s extra funds count. According to the Oregon Department of Revenue, the funds are to be allocated towards such initiatives as employee security training, increased use of security cameras, and new ventures dubbed “cash handling locations,” that would be prepared to accept large cash payments to the state. Most of the state’s transactions involving medical marijuana take place in cash, since the federal ban on recreational pot has led to many traditional banks steering clear of the state’s sanctioned retailers and growers.
According to Don Morse, owner of the Human Collective in Southwest Portland, the tax hike is unlikely to seriously affect most recreational consumers, or to have led to consumers stocking up on cheaper products ahead of the tax’s institution. This is because, unlike medical marijuana consumers, those purchasing recreational cannabis rarely buy it in large quantities.
“Every time you go to a liquor store, you don’t buy a whole case of something,”
Said Morse. “You buy a bottle.”
Morse does not believe consumers will be discouraged. In fact, he may run into a different problem, as the change will force him to keep large amounts of money on hand. “That is a lot of extra month to keep on hand,” he said.
Oregonians are set to vote on the legalization of marijuana for recreational use this November, but that hasn’t stopped some Oregon cities from passing taxation laws before the state vote occurs. Seems strange right? Not when tax revenue to your city government is at stake.
Measure 91, which would allow the legalization of recreational marijuana would bar local governments from placing a local tax on marijuana. The folks behind the “Vote Yes On 91,” campaign don’t want marijuana sales taxed at the local level, because lower-priced weed discourages purchasers from going to the black market for their goods. “We already have a marijuana market, it’s just an illicit market,” said Amanda Reiman, a policy manager at the Drug Policy Alliance. “Habits die hard. The price definitely makes a difference there.”
Most cities that are enabling this tax are placing it at 10% but others are taking a more extreme approach and placing the tax at 20% in an effort to push out dispensaries. Several estimates place tax revenue from legalized weed in the state between $17 and $40 million annually. If Oregon consumers react in the same manner as Colorado’s, we estimate that the state would bring in about $24 million a year. With that amount of money at stake, it starts to make sense why local governments are actively putting measures in place to secure their own financial success.
It’s still up in the air as to whether the state will grandfather in these local laws after the state initiative successfully passes. Measure 91 already proposes to allocate 10% of the total tax revenue from recreational marijuana to municipalities for local law enforcement. This begs the question of the need and efficacy of additional tax dollars being handed over to local governments due to their own decree.
Oregon cities are looking to cash in on the legalization of marijuana. Whether it they grab hold of this revenue via special taxes or permitting fees, they will most certainly reap the benefits of legalization at a local level.