Colorado Marijuana Sales Up 5 Percent

April 9, 2014 § 1 Comment

Updated 8:33 a.m EDT April 9:  Colorado’s second month of recreational marijuana tax collections officially shows sales just about flat – up 5.2 percent.  But since February has just 90.3 percent of January’s 31 days, a better comparison might be 1.052/.903, for a 16.4 percent increase.   (Thanks to Professor Bill Turnier of UNC Law School for mentioning the number of days.)  (This blog post looks only at recreational sales, not medical.  Another post covers the dominance of medical marijuana.)

The 2.9 percent sales tax:

January $416,690

February $438,253.

 

Total recreational sales:

January $14,368,621

February $15,112,172.

Both those ratios are 1.0517 to 1:   « Read the rest of this entry »

Auctioning marijuana licenses — exponentially

April 2, 2014 § Leave a comment

The City of Oakland enacted, a while back, an annual fee of $211,000 for each of four “marijuana factories.”[1] Other schemes to raise revenue through licensing at all levels of commerce are numerous. Requiring licenses for everyone in the supply chain conforms with evolving international standards for tobacco.[2]  Making licenses expensive or otherwise restricting them narrows the supply chain at a possible choke point.[3]  Consumer licenses have been suggested, [4] and correspond to cards issued to medical marijuana patients.

Auctioning[5] licenses could let government share the proceeds of legalization. An annual license auction might be optimal. After the first year, the incumbent might be able to outbid others because of intangibles it developed from the first year’s license. (Entrenched incumbent sellers are not necessarily a good thing.)

So what if the incumbent had to outbid competitors by a compounding excess? Say 10 percent. So the second year, the incumbent would have to pay 110 percent of the next bid; in the third year, 121 percent, and so on. After ten years, the incumbent would have to bid some 2.5 (1.1 to the 10th power) times the next bid to prevail. That rule could spread the wealth and power around — or finance spending, allow tax cuts, or reduce debt. « Read the rest of this entry »

Marijauna: Uruguay Si! Taxes No!

March 27, 2014 § Leave a comment

I’m to give a paper and talk on marijuana revenue policy in Rome at the International Society for the Study of Drug Policy meeting in May.  Here’s what I’m thinking (comments welcome).

++++

State monopoly, Uruguay style, is the safest start for legalization of an intoxicant.  But it’s not easy.  Corruption and cronyism threaten.  Transparency and division (separation) of power are vital to keep trust.  Short terms for officers, even if renewable, and appointment by members of different branches of government or different parties may be worth exploring.  State production might provide unresponsive products, so the Norway/North Carolina alcohol model is worth a look.  That model lets private enterprise produce and supply product to a state monopsony, which is also a retail monopoly.

If monopoly is a nonstarter, as in the United States so far, tweaking the monopoly model to keep state control over location and price by assigning sales concessions to private contractors may be worth a try.

Taxation, Colorado and Washington style, is a second-best path, at least as long as tax rates are inflexible.  Bootleggers don’t hesitate, in part because they don’t deliberate.  They can change prices faster than a corner gasoline station, and they will fight a price war to win.  No Legislature can outmaneuver them.

Marijuana Revenue Drops in Pueblo County

March 27, 2014 § Leave a comment

Pueblo County, Colorado, is starting to look like the Dixville Notch of marijuana revenue reporting.  Pueblo County reported its January results before the state did, and it has done the same for February.

Month over month results are down.

Jeff Tucker of the Pueblo Chieftain reports:

The second month of legal recreational marijuana sales in Pueblo saw three more stores open and $4,000 less in sales tax revenues collected by the county.

Pueblo County Clerk and Recorder Gilbert “Bo” Ortiz said five Pueblo County stores delivered $28,724 in sales tax to the county late last week, representing roughly $820,000 in total sales for the month of February.

. . .

 The state collects both of those taxes and those totals won’t be official until the state issues a report sometime next month.

But based on what the county collected from its own tax, it stands to gain about $49,000 from the sale of recreational marijuana in February.

In January, the county collected $32,643 in county marijuana tax from just two stores and brought in a total of about $56,000 from all marijuana sales tax sources.

It may be that the novelty of legal weed has worn off a bit from its historic first month, but Ortiz said it will be difficult to make any real predictions or analysis until after the county has a full year under its belt.

Folks hoping for marijuana revenue pointed to the opening of more stores as a positive.  Maybe in Pueblo, the positive of more stores was trumped by loss of novelty, or one-time tourists.  Most likely, the sample size is too small to be useful.

But the “new stores” argument doesn’t get me far, because new stores new need customers, and new (post-January) buyers of recreational marijuana could plausibly come from three categories: (1) switchers from the medical market to the recreational market, (2) switchers from the black market to the legal market, and (3) former non-consumers.  I don’t see how new stores add to the number of customers (or more precisely, sales) in any of those categories other than at the margin.  [UPDATE March 28: But new customers could come in from any category because legal supplies were low – and as legal prices drop.]

UPDATE:  2:10 p.m. Eastern:  January sales could be abnormally high because consumers bought several months’ supply when legalization started.  And a friend writes:  “I imagine that the stores are having supply issues . . . it’s about a 3 to 4 month long growing cycle, so when those first big harvests are ready in the next month or so, we’ll probably see that there is more supply, prices go down, and more purchases are being made.”  In that case, sales measured in ounces will go up for sure, but the price declines will work to bring sales measured in dollars and taxes down.  The net effect could bring in more revenue or less.  [UPDATE March 30:  Colorado will recalculate "average market rate" for the period starting July 1 -- and that may reduce the tax rate from its current 62 cents per gram of flowers and 10 cents per gram of trim.  Colorado's switch, de facto, from percentage to weight is covered elsewhere on this blog.]

2:40 p.m. Commentor “john_downs” at this site points out that February has fewer days than January – enough to make the results basically flat.  “[T]he county will make 8.8% less tax revenue by the month, but the month of February has 9.7% less days than January so it is still a gain in revenue per day. Sounds like an increase to me.”  I would calculate revenue at $28,724 divided by $32,643, for 88 percent, or 12 percent less revenue and sales, but the point about days is valid.

3:51 p.m.  Earlier posts on this blog look at how Colorado numbers might play out in light of early results.

 

If You Can’t Tax Marijuana, Tax Electricity?

March 27, 2014 § Leave a comment

Tax what you can find.  Tax what you can measure.  Humboldt County, California, is considering following the lead of Arcata and taxing excessive electricity use – associated with indoor marijuana grows.  Once electricity use exceeds a high threshold, the tax kicks in.

From Will Houston in the Eureka Times-Standard:

Third District Supervisor Mark Lovelace said that the tax would benefit the county in three ways — reducing environmental impacts, reducing housing stock that is “being consumed by grows” and generating revenue — but could not have them all at once.

« Read the rest of this entry »

Smuggling and Counterfeiting

March 25, 2014 § Leave a comment

Evasion of cigarettes taxes in the developed world occurs in two forms, smuggling and counterfeiting.

The smuggling form involves cigarettes that have incurred tax somewhere and that were legal through all but the last steps of the supply chain.  A typical transaction involves a pack of cigarettes bought legally and tax-paid in a low-tax tobacco-producing state and resold illegally without further tax in a high-tax jurisdiction like New York City.  Those cigarettes were cost-effectively manufactured by an identifiable, deep-pocketed corporation that tested them for quality  — on which its reputation depends.  They bore federal tax and the tax of some state (or maybe tax of some country).  They are in a recognizable branded package, designed by the manufacturer to prevent counterfeiting.  Customers know what they are getting.  Analogous jurisdiction-shifting evasion for marijuana will not appear until at least two jurisdictions legalize it.  Then bootleggers will be interested in transporting tax-paid marijuana from a low-tax state to a high-tax state.  As today’s Wall Street Journal points out, tobacco companies may turn a blind eye to smuggling: “Tobacco Firms Step Up Fight Against Cigarette Smuggling:  Labs Examine Fake Smokes; Critics Say Industry Turns Blind Eye to Smuggling of Real Cigarettes.”

« Read the rest of this entry »

Marijuana Revenue: Oregon 2014 — from HuffPost

March 20, 2014 § Leave a comment

The Oregon Legislature took a hard look at marijuana legalization in early 2014, but failed to act. So November voters may get to choose between legalization initiatives with dueling revenue ideas. The Control, Regulation, and Taxation of Marijuana and Industrial Hemp Act (CRTMIHA) puts marijuana commerce in the hands of private sellers — and taxes it modestly. The Oregon Cannabis Tax Act of 2014 (OCTA) lets the state make big profits from monopoly sales.

CRTMIHA taxes marijuana by weight. Per-ounce rates are $35 for “flowers” and $10 for “trim.” Seedlings bear a different tax — $5 each. (CRTMIHA partly indexes dollar amounts. « Read the rest of this entry »

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