Is Colorado’s new marijuana tax leaky?

My friends who are professional marijuana legalizers point with satisfaction to taxes that marijuana brings in. Maybe my scheme to beat Colorado’s new marijuana tax procedure doesn’t work.  I don’t condone or encourage cheating — au contraire.  But I would be nervous that Colorado’s tax is beatable around the edges — not to let people pay zero tax, just to pay less than they owe.  Continue reading “Is Colorado’s new marijuana tax leaky?”

NV’s marijuana tax model for MA

When I decided to study cannabis revenue, the most advanced thinking I could find early on was that of Dick Evans, a Northampton MA lawyer.  My first footnote in my first article , saying his website was then “probably the most comprehensive compilation of information about laws to tax marijuana” in the world, was a tip of the hat to Dick, who got me going in March 2010 by having me testify before a committee of the Massachusetts Legislature (which wasn’t much interested).

Dick has an opinion piece in the Boston Globe, and I agree with some of it – especially the last part. The title is, “On marijuana law, the Legislature is fixing something that isn’t broken.”

But here’s Dick’s conclusion:

“Allow the voter-enacted law to be implemented, tweaking it only to make up for the lost time. Let the bureaucrats do their jobs. Let people know where to file applications.

“Let’s catch up to Nevada.”

+++

So he’s not opposed to tweaking. And I’m with him on Nevada.  While I don’t think Dick necessarily had tax improvements and increases in mind, it’s worth noting that the Nevada Legislature took what the voters had done but then improved the tax structure: The Legislature increased the tax on medical at the pre-retail level and added a brand new recreational retail tax. Not only that, they are pioneering a new weight tax, with new categories that Colorado doesn’t have. ‪https://newrevenue.org/2017/07/02/nevadas-70-cent-per-gram-tax-on-marijuana-flower/ 

Now Nevada’s quick, if tormented, move to recreational sales (which started this month) is quicker than MA’s.  Maybe a strong tax plan is part of a sound overall plan, so NV’s success with both is part of shrewd thinking.  That’s pure speculation.

California Marijuana Tax 280E Conformity

California is considering letting individuals deduct all marijuana business expenses on California state income tax returns. The bill is A.B 420. A hearing is scheduled for July 12. http://sgf.senate.ca.gov/agenda

The real money here is in pass-through entities – S Corps, LLCs, and partnerships. These taxpayers get federal 280E treatment on California returns– they can deduct only cost of goods sold. California corporations can deduct all expenses. Here’s a long explanation of that California anomaly: https://newrevenue.org/2015/05/15/technicalities-of-california-marijuana-advertising-discrepancy/

The California Blue Ribbon Commission on marijuana legalization mentioned a possible rationale for part of California’s 280E nonconformity for individuals – as a way to limit advertising that opponents of legalization object to: Continue reading “California Marijuana Tax 280E Conformity”

Nevada’s 70-cent per gram tax on marijuana flower

Nevada taxes marijuana like Colorado, with a weight tax (and a percentage-based retail tax).

It starts with a percentage rate. Nevada’s new tax law, passed by the Legislature and effective July 1, 2017, taxes all cannabis, medical and adult-use, at “15 percent of the fair market value at wholesale of the marijuana.” https://www.leg.state.nv.us/App/NELIS/REL/79th2017/Bill/5688/Text.

That’s in addition to the 10-percent retail tax, which applies only to adult-use product, not to medical cannabis.
“The Fair Market Value at Wholesale is utilized by the Department in levying the wholesale excise tax imposed pursuant to NRS 453D.500 on the sale of marijuana by a marijuana cultivation facility.” https://tax.nv.gov/uploadedFiles/taxnvgov/Content/FAQs/Fair%20Market%20Value%20at%20Wholesale_July_1_2017.pdf

“The Department determined that the excise tax upon wholesale sales of retail marijuana can effectively be levied upon seven product categories:
1. Flower
2. Small Bud
3. Trim
4. Wet Whole Plants
5. Immature Plants
6. Pre-Rolls
7. Seeds.”

The prices to be multiplied by the 15-percent rate include $2,145 per pound for flower and $631 per pound for trim. So the tax per gram is 70 cents for flower and 21 cents for trim. The chart, with several more categories, is at https://tax.nv.gov/uploadedFiles/taxnvgov/Content/FAQs/Fair%20Market%20Value%20at%20Wholesale_July_1_2017.pdf. Continue reading “Nevada’s 70-cent per gram tax on marijuana flower”

Caulkins on marijuana taxes

My friend Jon Caulkins has a useful and thoughtful article on marijuana taxation here. Jon and I were among the co-authors of the RAND Report, “Considering Marijuana Legalization: Insights for Vermont and Other Jurisdictions.”  I don’t agree with all of Jon’s new article, but I agree with a lot.  (Some of it is line with my recent article in thehill.com.)

Here are some excerpts from Jon’s article:

“Marijuana prohibition is tottering, and procrastinating on doing the hard work of thinking through tax principles will more or less ensure a bad replacement.”

“The states leading the legalization charge have enacted primitive taxes that will fail as marijuana prices fall because they are computed as a percentage of value.” Continue reading “Caulkins on marijuana taxes”

Massachusetts Marijuana Tax Compromise

Here is an excerpt from my letter to the Editor of the Boston Globe, just published online:

In November, Massachusetts voters approved a 12 percent marijuana tax that would undercut the black market, but the House has proposed a 28 percent rate, in line with what other states collect.

Both sides are right — at different times. The marijuana market is a moving target, and needs a moving tax rate. As time goes on, pretax prices will fall, and the black market will weaken. So taxes can go up.

A solution is at hand — provided by proponents of marijuana legalization in federal bill S.776, the Marijuana Revenue and Regulation Act: Schedule rate increases to phase in year by year.

If increases come too fast, the Legislature can cut taxes. That avoids the problem of having legislators vote to raise taxes as needed, which is like cutting off a cat’s tail an inch at a time. Do it now and get it over with. Continue reading “Massachusetts Marijuana Tax Compromise”