Many of my friends who support marijuana legalization analytically point with satisfaction to taxes that marijuana brings in. Maybe my scheme to beat Colorado’s new marijuana producer 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?
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.
2018 UPDATE: A.B. 420 failed to pass, and is dead for the moment.
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 taxes marijuana like Colorado, with a de facto weight tax (and a percentage-based retail tax). Alaska taxes only by weight. So three of the five states collecting marijuana taxes now are doing so by weighing every gram (Washington and Oregon tax only by percentage of retail price). UPDATE: California taxes by weight, too; MA and ME don’t. The Tax Foundation’s strange claim that taxing by anything other than price is “untenable” loses even more credibility. After all, price taxes have almost no place in federal alcohol taxation. States stick to volume for alcohol, too, in general.
UPDATED RATES JUNE 2018:
Nevada taxes marijuana by weight, de facto, with these categories and current rates:
Flower — 75 cents a gram
Trim — 20 cents a gram
Small bud — 50 cents a gram
Wet whole plant — 7 cents a gram.
NV taxes by the unit
immature plants ($15)
Those are calculated, as described below, from this data: https://tax.nv.gov/uploadedFiles/taxnvgov/Content/Forms/Retail-Marijuana-Fair-Market-Value-Jan-1-2018.pdf
Like Nevada, Colorado has seven categories, too. https://newrevenue.org/2015/10/12/beyond-bud-trim/
ORIGINAL DATA: Nevada 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:
2. Small Bud
4. Wet Whole Plants
5. Immature Plants
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 per-pound tax, at 15 percent of $2,145, is $321.75, and there are some 453 grams in a pound.) 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. NOTE: Those per-pound rates have been updated: https://tax.nv.gov/uploadedFiles/taxnvgov/Content/Forms/Retail-Marijuana-Fair-Market-Value-Jan-1-2018.pdf Continue reading Nevada’s 70-cent per gram tax on marijuana flower