New York’s Radical THC Potency Tax on Marijuana Flower

We don’t know the best way to tax cannabis, but New York State is advancing the process.

With a THC potency excise tax, New York is starting a bold and radical experiment.  It’s the first jurisdiction in the world to tax cannabis flower or bud – smokeable plant matter – by THC content.  Canada taxes processed cannabis at 1 Canadian cent per milligram of THC, but taxes flower with a weight-based tax, at $1 per gram.  Canada doesn’t tax flower by THC. New York’s tax of 0.7 cent per milligram of THC of flower is revolutionary.  

Continue reading “New York’s Radical THC Potency Tax on Marijuana Flower”

Implications of THC taxation of imported marijuana edibles

Along with some friends, I helped write this for Washington State:

“Concentrates that are infused or contained in other products for retail sale, such as those that go into edibles, sublinguals, tinctures, topicals, suppositories, and other processed cannabis products are additionally difficult to test accurately after being mixed with other ingredients.” Cannabis Potency Tax Feasibility Study: A Report for the Washington State Liquor & Cannabis Board,

I remember hearing that from stakeholders out there, and I still believe it, especially for more solid products like edibles.

Say we want, for a domestic tax scheme, a THC tax on concentrates, imposed before mixing or incorporation into a final product.  What do we do about imports?  Take an imported brownie, for instance.

Maybe the Narcotics treaties will prevent imports for a while, but maybe not forever.  Weight-based taxes plainly don’t make sense for brownies or similar imported processed products, which could be loaded with sugar instead of THC or other cannabinoids.  (And we can’t identify the raw plant matter that went into the processed import.)  I’m struggling to think of options beyond THC, sampled after incorporation into the final product, and ad valorem.  Ad valorem is especially unattractive there, with transfer pricing between foreign parent manufacturer and U.S. subsidiary distributor (a typical and unobjectionable business arrangement) a big problem – the foreign manufacturer would like to understate the price of the brownie to keep the ad valorem tax down.

So if we tax the imported brownie on the basis of THC sampled after incorporation into the final product, what about the domestic brownie?  Treat it like the imported brownie, measuring THC late in the process?  Or sample and tax the concentrate that goes into the domestic brownie, early in the process — leading to two similar edibles being sampled and taxed differently?

How Not to Be Wrong — Public Domain Book

Among Bill Gates’ ten favorite books,, along with The Great Gatsby and Sapiens and Parenting with Love and Logic, is How Not to Be Wrong: The Power of Mathematical Thinking, by Jordan Ellenberg. Any dense math is skimmable. It’s in the public domain, but the site where I got it said “Not Secure,” so I’m posting it here.

Administrability of Retail THC Tax

Having worked on a study for the State of Washington of the feasibility of taxing cannabis by THC content, I was nervous about the idea.  The report I helped write had this:

“[R]etailers . . .  had little confidence that the POS [Point of Sale] systems could provide the information that they would need to process sales efficiently. Unless potency readings are reliable and readily available at the point of sale, or unless the state uses a simpler model such as a product-based potency estimate to determine a product’s tax, retailers fear that their staff would have to manually calculate tax liability for each item at the point of sale. This would create impossible bottlenecks for stores, many of which move tens of thousands of dollars of product each day. The system of attributing potency to a product would need to be streamlined and automated so as to avoid bud tenders inadvertently collecting the wrong amount, or worse, gaming the system to create a commercial advantage.”

But maybe a retail THC tax is more feasible than we gave it credit for.

I wrote Jim Morgan, CFO of the Washington State Liquor and Cannabis Board (WSLCB) and a tax policy and finance expert, whom I had the good fortune to meet in Olympia while working on the study.

From: Pat Oglesby [] 
Sent: Tuesday, September 29, 2020 3:07 PM
To: Morgan, James E (Jim) (LCB) 
Subject: POS

Dear Jim,

After all this time, do you suppose that POS technology has advanced to the point where a stated THC tax would be about as administrable as an ad valorem tax?

With highest regards,


He wrote back, with a useful take:

Tue, Sep 29, 2020 at 6:54 PM


I am quite sure that POS vendors are skilled enough to build this functionality into their systems.  I believe that THC content is captured in many cases as an attribute of the inventory items in the POS system.  There is not much business value to the cannabis businesses beyond that, though.  Specific functionality that could use this information for tax purposes would only be developed in response to specific regulatory requirements.




I’ve been skeptical of retail ad valorem taxes, so I’m starting to think a retail THC tax is better on policy grounds (for reasons listed in Chapter Five of the RAND Vermont report, — and maybe feasible after all, if a state wants one. It would take some work, but so does every change.

Black market is out; Bootlegging is in

A draft article I’m working on goes into selling of marijuana illegally, whether in violation of prohibition or of tax laws.  Under legalization, bootleggers, adept at violating prohibition, commit a new and different crime: tax evasion.  But the cat-and-mouse game of enforcement against bootlegging is pretty much the same, whether the crime is violating prohibition or cheating on taxes..  

Several readers object to the term “black market,” on the theory that it has racist origins.  Maybe that’s accurate.  Either way, some say it disparages Black people.  So I’m steering clear of the term.  Words are here to serve people; people aren’t here to serve words.  Cf. Mark 2:27.   (I’ll keep using the derivative term “gray market,” or grey market, referring to transactions like a patient’s selling legally bought medical marijuana to a recreational user.) 

Illegal market, unauthorized market, illicit market – they all take more space and syllables than their predecessor.  What’s the opposite of punchy?  So I struggled for a substitute.  

Bootlegging (origins obscure) is it.  Three syllables.  The permutations — bootlegger, bootlegged — are as short as the old terms or shorter.  And they’re punchy.

Taxing Marijuana Testers

If you don’t think the marijuana revenue pendulum can swing too far, look at a tax singling out the prototype of a business providing clean, lucrative jobs.  Some localities in California tax every ancillary business they can think of – even testing labs.

Someday, people will look back at some of those taxes and wonder, “What were they thinking?  To prove they existed, here are some screen shots showing two localities taxing testing labs specifically.  Lots more California localities tax testing labs under a catch-all cannabis business category.

That testing has to take place somewhere, under California law. What negative externalities doe testing labs create? Those high-tech, highly paid jobs create positive externalities.

Source is “Tax Rates for Cannabis in California Cities and Counties,”—July-20-2017-2?bidId=.

San Diego County is paying for weed tax expertise.

A friend in the marijuana community told me that San Diego County, California, was going to pay people to tell them about local cannabis taxes.  The application asks for lots of info and background — limited to 10 pages (!). Some of it is pasted below.  I wrote a County official: “I don’t have the ambition to do all the work involved with the cannabis tax RFI [Request for Information, the application], so won’t apply for that work,” but sent along two articles on local taxes: a layperson’s piece from thehill.com, and amore technical piece from State Tax Notes,

Then I wrote:

Some more pro bono thoughts.  Local cannabis taxation is not scientific.  You can’t be sure what the market will bear (if maximizing revenue is what you want).  My hunch is that the study you ask for will cost you more than it’s worth. There’s no precise tax rate that a study will reveal.  You just take a stab at it.

Your population is concentrated pretty far from borders with counties that might compete with you for cannabis trade if your push taxes too high; competition from Mexico has extra problems.  You can look at how tax burdens in other California jurisdictions affect commerce nearby, and you can look at the Washington-Oregon border. Washington State Economic and Revenue Forecast, September 2016, Volume XXXIX, No. 3,

I wish I could help more.

With highest regards,


Someone once accused me of being “just a blogger with too much time on his hands.”  Maybe so.

Here’s part of the document:


Quantifying anti-insurrection efforts

In 1794, the Commander-in-Chief himself, President George Washington, “organized a militia force of 12,950 men and led them towards Western Pennsylvania” to put down an insurrection aimed at the new federal liquor tax.  Our population in 1800 was 5,308,483 – so about one of every 4,115 Americans was in that militia.  Today, with 331 million Americans, that 12,950 number corresponds to over 800,000 defenders against insurrection.  

Continue reading “Quantifying anti-insurrection efforts”

Government marijuana retailing in Virginia

A recent post here critiqued a recent Virginia marijuana legalization report for downplaying the possibility of state retail sales, pointing out that subnational governments, like Louisiana’s are already “active participants” in American marijuana sales, and saying that while there are good arguments against government marijuana sales (and for them), federal illegality is an argument that can be handled.

And my post indicated that I couldn’t find Appendix J.  I wrote Virginia folks associated with the report, and got not only a link to Appendix J, but a thoughtful and reasoned response on government sales.  After pasting that response from Virginia, I’ll paste my reply, but first, here is what I received from Virginia:


Good morning – Appendix J is available in a separate set of online appendices, which you can find on this landing page:

Our cautionary note on state involvement is because it would be unprecedented for a state to become an active market participant in a commercial, recreational market. No other state has attempted this so it’s not clear what (if anything) the federal response might be. The feds could take no action or view it as a bridge to far. It’s also unclear if the state might be successfully sued by its neighbors. Early on when Colorado legalized, it was sued by two of its neighbors on the grounds that Colorado marijuana was harming their communities and stressing their police focres. In this case, CO was just acting as a regulator; it was not a market participant. The Supreme Court declined to hear the case, which provides some reassurance that a state can regulate marijuana without being sued. However, if a state becomes an active market participant, then there is a different case to be made. It’s not clear how that would play out in court.

It sounds like Louisiana has some limited involvement in the med market, and has not gotten in trouble for it. However, it does sound like they are running some sort of calculated risk. I don’t know all the particulars of LA’s arrangement, but from what you’ve said it sounds like they play a limited role as a middleman between the private producers contracted by the universities and the private, licensed pharmacies that sell to consumers. That limited involvement in medical marijuana is much different from the level of risk we considered when looking at state involvement in a rec market. 

I would except LA would be running a much greater risk if it either expanded its role or started being involved in a rec market. Rec markets involve much greater volumes of marijuana than medical. Some of that marijuana will inevitably start being illegally exported across state lines, which then gives both the feds and neighboring states a reason to care about it and make a stink.

I would add that my team are not lawyers ourselves, buy we have consulted with several lawyers on this question. The general consensus, which I hope comes across in our report, is there is a risk to state participation but the ultimate outcome is unknown. Something could happen  to a state that becomes involved in the rec market as a distributor or retailer, or nothing could happen.

Happy to talk more if you would like.



Here’s my reply:

Dear [],

Thank you for your reply.  I quibble with some of the work in your report, but applaud the effort as a whole.  You seem to have spotted the issues; how to weigh pros and cons is not something that can be proven right or wrong.

While I’ve written about state sales and federal illegality, they are not the issue I find most interesting.  The choice of an ad valorem tax is where I would start, echoing concerns from think tanks, both left (ITEP research indicates that taxes based on weight will be more sustainable over time because prices are widely expected to fall as the cannabis industry matures) and right(“Taxing based on prices means there is a taxable event with a transaction, allowing for simple valuation. Yet, while it may be simpler to levy the tax based on price, it does not necessarily offer an equitable solution.” – Tax Foundation).  But that’s for another day.

But for the issue of state retailing, here are some reactions to Appendix J:

“In Canada, the Ontario state government attempted to establish its own retail stores but gave up after a year, largely because of logistical challenges.” 

My understanding is instead that Ford’s party won the election and made an ideological choice.  That said, the roll out in come provinces has been tricky.

“While the U.S. Department of Justice has tolerated states that regulate commercial marijuana (and hence enforce restrictions on the substance), it is unclear how the department would respond to a state taking on an expanded role and actually distributing and selling marijuana.  Virginia could also face legal challenges from residents and neighbor states if it implements a government control model.”

Who can predict what will happen?  But the first concern seems remote in a Biden Administration.  And like Colorado’s neighbors, Texas didn’t get very far suing other states recently, this time to change their 2020 election results – a different case, and there were two dissents, but still.  This seems like excess of caution.

“The government control model would also take much longer to implement than a fully private approach because the state would have to establish its own operations before the commercial market could open. State government usually moves at a slower pace than the private sector, so it would likely take longer to establish operations. The state would be further slowed by the sheer volume of additional work required.”  And it would cost more up front.

Good points, but your private roll-out is looking at two years.  Newly licensed growers won’t have material ready to sell for a while.  I look at China, which can make things happen fast.  The process of licensing will drag on and on, I think – if you can’t prevent appeals, state stores could actually be a shortcut.

In one approach, “the state would need to lease or purchase hundreds of properties” and incur other upfront expenses.”  

But you note that government sales, in the long run, can be the most profitable.

Can’t you issue a bond?  It’s an investment that would take care of the upfront costs and prove lucrative in the long run.

In another approach, “[t]he state could try to contract out retail, but this would likely be too time consuming and costly.”

Not understanding why.  Picking retail licensees might be time consuming and costly, too.

Look, these are all judgment calls involving balancing.  The marijuana community is suspicious of government, and would resist state sales.  Marijuana sellers don’t want to let government take business, and they are the ones making campaign contributions these days, so even if you were less skeptical of state stores, the Legislature might get its own ideas.

It’s more useful to think about that ad valorem tax base than about this issue of government sales.


Meanwhile, are you all not members of the multi-state group?

Again, thanks for your thoughtful reply – and congratulations on your good work. 

With highest regards,

Dr. Dale Gieringer joins CNR Board of Advisors

The Center for New Revenue is delighted to announce that Dale Gieringer, Ph.D., long-time head of California NORML and a veteran cannabis policy scholar, has agreed to join its Board of Advisors.

I first became familiar with Dale’s work at the beginning of my work in marijuana tax policy.  My first marijuana article, in State Tax Notes in 2011, cited his 1994 ‘Economics of Cannabis Legalization.’’  So he’s been at it a lot longer than I have, and longer than just about everyone else these days.  When I went to California as part of the Newsom Blue Ribbon Commission studying legalization, I asked the late Mark Kleiman, a preeminent public policy scholar, whom I should listen to.  Dale’s name was at the top of Mark’s list.  I thought it would be.

Here’s a bio:

Dr. Dale Gieringer received his Ph.D at Stanford on the topic of DEA drug regulation. He is the author of articles on marijuana and driving safety, drug testing, marijuana health mythology, the economics of marijuana legalization, and DEA “drug enforcement abuse.” He is a co-author of Marijuana Medical Handbook: Practical Guide to Therapeutic Uses of Marijuana.

Dr. Gieringer has been the state coordinator of California NORML since 1987. He is also director of the California Drug Policy Forum (DPFCA) and treasurer of the Oakland Civil Liberties Alliance.

Dr. Gieringer has published research on medical marijuana usage, marijuana smoke harm reduction, potency testing, marijuana and driving safety, and drug urinalysis. He has testified before the legislature and in court on issues concerning personal use of marijuana. He was one of the original co-authors of California’s medical marijuana initiative, Prop. 215, and the proponent of Oakland’s Measure Z cannabis initiative in 2004.

In 2010, Dale was named High Times Freedom Fighter of the Year and in 2011 he received a Drug Policy Alliance Robert Randall Award for Citizen Action.


Dale and I don’t agree about everything, but that’s what a Board of Advisors is for.   I will appreciate my friend’s counsel.

Pat Oglesby, Founder, Center for New Revenue, January 2, 2021

Center for New Revenue Tax of the Year: New Jersey

Time magazine has a person of the year; the Center for New Revenue is inaugurating a tax of the year.  For 2020, it’s New Jersey’s new marijuana tax, which goes up as prices go down, stabilizing after-tax prices – a good idea, because pre-tax prices vary widely in the early years of legalization, and the legal market gets a tax break as bootleggers get marginalized during the roll-out of product in the early days of low supply and high demand .

Details about the tax are here  An unfortunate detail is that the new law has not been signed yet.

Federal illegality doesn’t stop states from selling marijuana

When I was the only lawyer working on the RAND report on marijuana legalization for Vermont, my non-lawyer colleagues told me that state sales were unrealistic, since they would be federally illegal.  A recent report out of Virginia echoed that notion.  “If a state government became involved in marijuana distribution or retail, it would become an active participant in a federally illegal enterprise, instead of just acting as a regulator.”

But subnational governments are already “active participants” in American marijuana sales.

The State of Louisiana is possessing medical marijuana for eventual sale.  “As of July 29, 2019, the Louisiana Department of Agriculture and Forestry (LDAF) is in receipt of medical marijuana final product from Louisiana State University’s (LSU’s) sub-contractor GB Sciences of Louisiana, LLC (LSU-GBSL).”

Here is some lore about what happened in Louisiana:  The Legislature provided that LSU and state land-grant Southern U. would be the sole growers of medical cannabis.  There were worries that LSU and Southern, as publicly funded institutions would be entering a legal gray area that could risk their federal research funding.

Now, here they are as owners and possessors of the illegal drug.  Those universities decided to contract out the actual growing to private parties, reportedly (I heard this 3d-hand) because federal agencies that fund the universities big time were uncomfortable with the universities growing directly themselves – though the universities “touch the plant” by having title to the marijuana and profiting from its sale.  In any event, government marijuana sales in Louisiana are rolling merrily along.

Meanwhile, municipal government sales have been ongoing in Washington State since early 2015.  The Washington municipality that led the way in federally illegal marijuana sales, North Bonneville, transferred its operations to a neighboring locality, Stevenson, WA.  The retail store, advertised on twitter as “America’s 1st municipally owned pot shop,”, was reportedly expecting sales of over $1 million in 2019. I couldn’t find a website, but I called 509 427 4393, a number I found for 420 Evergreen, and spoke to a person identifying himself as Jason, who assured me that indeed the municipality of Stevenson owns it.  

So about that Virginia report: I’m intrigued by this statement, in light of Louisiana’s state production monopoly of medical cannabis:  “Unless marijuana is legalized federally, any state that attempts this approach takes on additional risks of federal intervention and new legal challenges from residents and neighboring states.”  And this: “More information about government-controlled distribution and retail is included in Appendix J

There is no Appendix J. Maybe there’s a separate document hiding somewhere?

There are good arguments against government marijuana sales (and for them), but federal illegality is an argument that can be handled.

WA marijuana tax collections soar

Cannabis revenue per capital in Washington for fiscal 2020 was $61.23:  That’s $468,810,000 in revenue for a 2020 population of 7,656,200.;

I once wondered “can any state get $43 per capita, like CO and WA?” So yes. Now Washington may have more consumers than the average state, but that $61.23 ignores local taxation, possible federal taxation, potential greater tax burdens, and general revenue, like income and employment taxes.

Those new WA numbers may reflect a surge in demand during the pandemic, boosting both demand and prices (Washington taxes ad valorem).

With a U.S. population of 332.6 million in 2020, that per capita $61.23 would work out to a total excise tax of $20.4 billion.

Little word choices (and 280E) in the MORE Act

The MORE Act marijuana legalization bill revenue estimate says the bill would increase federal revenue “by creating business income, compliance, and occupational taxes.” Congressional Budget Office, Cost Estimate, H.R. 3884, the MORE Act of 2020, as passed by the House of Representatives on December 4, 2020, Estimated Budgetary Effects,

I don’t understand.  Are there “compliance taxes”?  Or does that mean compliance with income and occupational taxes (and so on)?  (“Creating” seems an odd verb, too; I think of creating taxes as the legislative function of enacting them.)

And are there numbers showing the revenue effect of the elimination of 280E – “allowing certain deductions for business expenses associated with trafficking controlled substances”?  

I wrote CBO to wonder about all this, and will post any reply

Marijuana Price-Guessing Contest Winner Announced

In February, the Center for New Revenue announced a publicity stunt:  “What will Colorado’s Average Market Rate for flower be as of January 1, 2021?  It’s $1,316 [per pound at wholesale] today.  Best guess wins $100.  Enter at”

Colorado’s AMR is out – and the “retail bud rate” is $1,721 per pound – way higher than a year ago.  The pandemic may have boosted demand and prices. 

The winner of the contest is Scott Atkinson, owner of retail locations in Tacoma, Seattle, and Clarkston, Washington.  He said this:  “Please keep the $100 or use it for the next contest – I appreciate that you are driving a conversation and would love to see more participation.”  I appreciate that gesture, but I need to keep my commitment somehow, so we agreed to donate the cash to NORML.


With $1 tip:

The Rats Keep Winning the Rat Race

With craft brewers across the country and liquor interests in Mitch McConnell’s Kentucky cheering and campaign-contributing, Congress just voted to keep alcohol taxes low and unindexed.  Low alcohol taxes cost revenue, and hurt public health.  But special interests, now euphemized as “stakeholders,” call the shots in our government.  So alcohol taxes are too low. 

In 2009, I took up marijuana tax policy, because I figured that legalization without taxation was implausible – and that legalization was going to happen.

Out of the corner of my eye during that marijuana work I noticed that alcohol was undertaxed in America.  Today’s non-indexed tax of $13.50 per proof gallon has far from kept up with inflation. Since the early 1990s, that nominal rate has lost about 60 percent of its real impact.

Working on RAND’s Insights for Vermont let me know that I’m not the only one thinking that “the total social cost associated with alcohol abuse is very much larger than all costs and outcomes related directly to marijuana use.” And exposed me to the idea that “even a 10-percent reduction in alcohol abuse accompanying the doubling in marijuana use could be a net win for society.”

Here’s more on alcohol taxes and public health — a slam dunk case for higher taxes that doesn’t matter in our plutocracy:

I got out of the international tax business long ago on the theory that multinationals called the shots politically, and would continue to dodge taxes, as indeed they have. Monied interests, from liquor to high-tech companies, don’t pay tax. So we are borrowing what we need. Lots of experts say decifits don’t matter. Fingers crossed!