Indoor grows and canopy tax — An expert comments  

Preface by PO to the expert’s comments:

If you tax marijuana by canopy area – square feet of space under cultivation – you might be able to measure the area by aerial or satellite images.  That comports with a principle of taxation – tax what you can measure.  The RAND Report for Vermont says potency of raw flowers, and, in many cases, price, can’t be reliably measured.  So canopy area has a lot of appeal as a tax base.

But those images won’t detect indoor cultivation.  Here is some earlier discussion and criticism of an electricity tax aimed at singling out indoor growers. Meanwhile, more powerful batteries may make it harder for law enforcement to detect indoor grows – while reducing the environmental harm from those grows.

But if you want to collect tax on all commercially grown marijuana, what should you do?

I don’t necessarily agree or disagree with the following comments.  But they help the process.

An expert in the industry has this to say:

 “What would you do about indoor cultivation is levels and levels of tricky.  This will take heavy lifting.

“I can envision the pieces of some solutions for the issue.

“Indoor, even more so than outdoor, needs a state-level regulation that requires all licensed dispensaries to purchase their product from licensed producers.  That starts to untie the knot.

“My suspicion is that huge swaths of residential indoor production are for explicitly black market out of state sales, so the pieces of a solution that might work, wouldn’t apply to those folks anyways.  They’re cultivating indoor in California strictly because the risk is so dramatically lower than cultivating in the destination location.  Their target market explicitly wants indoor product, so moving to an outdoor farming situation isn’t in the cards.

“I’m a fan of low hanging fruit — provide a clear mechanism for residential indoor growers that want to be compliant to obtain rental space that meets their needs in a commercial/industrial park and to get a license & insurance.  Enough of them have markets in California that it’s worth the time and energy to address.

“Until there are legal sales and cross-state-line shipments in the US, indoor just isn’t going to go away.  It exists almost solely due to free market distortions.”

Here’s more from the expert:

“Politically, allowing residential indoor growers to get a commercial license and stay where they are at causes lots of problem from both a land use perspective and a residential density perspective.   What’s fine on 1 acre doesn’t work on 1/4 or 1/8th an acre.

“Clearly defining ‘medical’ and ‘hobby’ grows in terms of sq/ft instead of plant count brings us closer to a resolution.  A 4 light, 100 sq/ft hobby grow in the spare bedroom tends to not be very objectionable.

“The issue is clearly framed by differentiating between commercial cultivation and personal cultivation in residential spaces.  It’s the commercial activity causing the problem.  Unfortunately, it so happens that personal use cultivators sometimes experience the consequences of that.”

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Author: patoglesby

From 1982 to 1990, I worked in tax policy for Committees of the United States Congress. In recent years, I was Adjunct Lecturer at UNC-Chapel Hill's Business School and then Adjunct Professor at its Law School.

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