The Center for New Revenue

Current state weight-based taxes on marijuana bud or flower, per gram (and retail rates):

Alaska $1.76 (No retail tax).
California 33 cents (15% retail tax).
Colorado 34 cents (15% retail tax).
Nevada 75 cents (10% retail tax).

Math and methodology are at https://newrevenue.org/2017/07/02/nevadas-70-cent-per-gram-tax-on-marijuana-flower/.

Alaska statute says $50 per ounce.
California statute says $9.25 per ounce.
CO data is from from https://www.colorado.gov/pacific/sites/default/files/AverageMarketRate.pdf; NV data is from , up from 70 cents: https://newrevenue.org/2017/07/02/nevadas-70-cent-per-gram-tax-on-marijuana-flower/.

 

Email to Erika McConnell, Director of the Alaska Alcohol and Marijuana Control Office

Dear Ms. McConnell:

The cannabis industry naturally wants to repeal the weight-based, per-pound tax you have in Alaska. http://komonews.com/news/local/alaskas-legal-pot-industry-decries-taxes-seeks-changes

The state and the people have interests that conflict with those of the industry. Continue reading “Center for New Revenue opposes repeal of per-ounce marijuana tax in Alaska”

Marijuana Revenue Competition — Look Out Below

Exclusive license with State Tax Notes expired, so here is  the article: Tax Competition FINAL STN 5.7.18 Oglesby, from State Tax Notes, Vol. 88, No. 6, 2018.

Abstract

Beyond the ever-present illegal market, a more subtle threat to marijuana revenue lurks:

Tax competitors (think: tax havens) threaten subnational jurisdictions that can’t or don’t control their borders.

This article presents a framework for looking at threats to marijuana revenue: Continue reading “Marijuana Revenue Competition — Look Out Below — in State Tax Notes”

[UPDATE January 2019:  Yes, the chart is pretty good, but there are a few errors.  To be sure, check original sources.]

This is the best comparative chart on cannabis taxes I’ve seen, from Fox Rothschild, an 800-person law firm.  [UPDATED chart is here:  https://www.foxrothschild.com/publications/cannabis-industry-state-tax-guide/.]  The big accounting firms were still steering clear of marijuana, last I heard, and this is the biggest law firm I’ve heard of that’s been publicly associated with marijuana.

UPDATE:  I don’t intend faint praise for this work.  It’s a huge undertaking, and a valuable one.  Thanks to Jennifer Benda and Jacob Millis for doing it.  I want to be an expert on marijuana taxes, but didn’t have the patience for this big job.  This kind of exhaustive scholarship illuminates the landscape, as Alvin Rabushka did with Taxation in Colonial America.

In 2011, I could fit all the world’s marijuana taxes onto page 257 of this.  But there is more work to be done.   Now, there are hundreds of local taxes in California and Oregon alone — like Arcata’s electricity tax.  Local fees could fill a book already. Continue reading “CNR recommends cannabis tax chart”

I asked California Department of Tax and Fee Administration a couple of questions about why cannabis tax collections are coming in low.   At the end are the questions and the CDTFA’s helpful answers, from Paul Cambra.

My reactions:  I.  The producer or cultivation tax collected only $1.6 million in the first quarter because retailers some how brought untaxed products into inventory before the tax was effective on January 1.  Retailers then sold that untaxed product in early 2018.  The standard excise tax procedure for taxing jurisdictions is to apply a “floor stocks tax” to product that escaped tax as it came into inventory (and sits on the shelf or the floor).  See https://www.ttb.gov/tax_audit/floor-stocks-tax-faqs-answer.shtml.  California did not have a floor stocks tax, so had a short-term loophole.  Its effect will soon disappear.

II.  The 7.25% sales tax collected a lot compared to the 15% marijuana excise tax because the sales tax
1. includes pipes and t-shirts and so on;
2. is based on a real price, while the excise tax is often based on an artificial or phony price (the “average market price”) under California regs;
3. includes the 15% tax in the base (for an extra 1.0875% every time).

Continue reading “California cannabis tax collections explained.”

California released some info about cannabis tax collections May 11, 2018. I can’t figure some of it out. Questions below.

UPDATE: Dale Gieringer of California NORML answers, pointing out that most medical cannabis is not tax exempt. The only tax exemption is for product sold to patients who have bothered to get cards. So the sales tax figure is high because it includes sales of lots of medical cannabis. Few adult use licenses have been issued.

Continue reading “Confused by California marijuana tax receipts”

What’s wrong with taxing marketing expenses of opioid sellers?  The article suggesting that tax in the hill.com is posted below (exclusive license has expired).

Here are some possible objections:

1. The horse is out of barn – the problem is that this happened in the past. Most of the damage is done.

Response: Still, this works for the future.

2. My tax policy friends will almost all insist, in the name of theoretical purity, on taxing all income the same. They will say these are real expenses, and should be deductible.

Continue reading “Answering objections to a tax on opioid marketing”

UPDATED Below:

I’m to be on a marijuana revenue panel in Connecticut on Monday, April 30. The folks in Connecticut, like everyone else, want to know the bottom line. Whew. That leaves aside the preliminary and necessary questions of what to tax (weight or stated THC, I would say) and tax rates.

OK, jumping the preliminary issues, here’s a wild guess: $155 million a year after the market matures in several years. That’s $43 per inhabitant times 3.588 million population.

The $43 number comes from Colorado and Washington, which legalized two years before any other state. Both those maturing markets are collecting just about that much cannabis tax revenue now. Continue reading “Marijuana revenue — can any state get $43 per capita, like CO and WA?”

New York just started imposing an opioid “fee”; text of the law is here. That’s the fee or tax part of New York’s Opioid Stewardship Act, part of an omnibus health and mental hygiene Act, which is here. There is a lot of non-tax stuff in there

New York will collect  from opioid sellers every year $100 million (unindexed for inflation). Here’s how. After the year ends, all opioid manufacturers and distributors will report how many morphine milligram equivalents (MMEs) they sold or distributed. Each seller’s fraction of the total amount of MMEs sold will be its fraction of the $100 million due.   Retailers ordinarily don’t pay tax, and cascading sales (where one product changes hands several times) are taxed only once.

There are three carve-outs.
Continue reading “New York State takes $100 million in tax or fee revenue from opioid sellers”

I’ve learned a lot from my friend Jon Caulkins, a drug policy expert and professor at Carnegie-Mellon (we were among eight co-authors on the RAND report for Vermont, and he’s helped and encouraged me over the years).  Jon worries about for-profit marijuana businesses, and prefers non-profit businesses. Fair enough, but let’s think about practicalities.

In an article in the National Review, “Against a Weed Industry,” Jon suggests, for the eight states where recreational cannabis is legal, “The Justice Department can simply send a letter warning that if the company does not shut down within a reasonable time, its owners will be arrested and its assets seized. . . . The Trump administration could phase out those for-profit businesses in favor of nonprofit organizations by issuing a new memo. . . . Shutting down state-licensed businesses could feed the black market, but not if nonprofit organizations are allowed to take their place.”

But I can’t see that happening. It would be very hard, politically and practically, to replace for-profit cannabis sellers “in favor of” non-profit sellers. Getting from here to there is not easy. Continue reading “Forced conversion of marijuana businesses to non-profit? I doubt it.”

OK, they call it a fee, but it looks like a tax to me.  New York is collecting $100 million from opioid sellers -- with a few exemptions, like for Hospice use.

Here's the law:  http://nyassembly.gov/leg/?default_fld=&leg_video=&bn=S07507&term=2017&Summary=Y&Actions=Y&Text=Y, mentioned to me by Katherine "KT" Kramer of ASTHO.
 Continue reading "New York State’s $100 Million Opioid . . . Tax"

My new article in The Hill has this:  “Make expenses of selling opioids non-deductible on income tax returns. That is, sellers could not deduct the costs of those gifts, junkets, dinners, and salespeople’s salaries on their income tax returns. Making drug companies’ marketing efforts non-tax-deductible is a move, even if a small one, in the right direction. And legitimate users shouldn’t bear any of the tax burden. What’s not to like?”  The federal government can do this, and each state can, too, for its state income tax returns.

http://thehill.com/opinion/healthcare/382984-instead-of-taxing-opioids-we-can-it-put-the-tax-burden-directly-on-opioid

The Sacramento Bee says California marijuana sales in the early days of legalization are under state projections, but I don’t buy the analysis. Continue reading “California marijuana sales are on track, at least”

Pat Oglesby, founder and director of the North Carolina-based Center for New Revenue, announced plans to disband the non-profit, which has focused on revenue from cannabis, and to invest in hemp farming.

“It’s federally legal,” said Oglesby, “and there’s a lot of money to be made — without tax shenanigans.  I have lots of friends in the cannabis community. Most of them are in the recreational space, but some of them know plenty about hemp, and they are helping me navigate this transition.”

“Maybe someone else will take up the causes of thoughtful marijuana taxation, of government cannabis sales, and of reform rather than repeal of Tax Code section 280E,” he said. “It’s been a good run, but at age 70, I’ve had my say.” Continue reading “Center for New Revenue disbands; founder to invest in hemp farming”

Here is a quick look at local cannabis taxes in the eight states with legal recreational cannabis commerce.

A starting point is a State of Connecticut document that’s close to right:  https://www.cga.ct.gov/2018/rpt/pdf/2018-R-0034.pdf

“Additional local taxes apply in all of the states except Maine. Local marijuana excise taxes may apply in municipalities in Alaska, Colorado, Massachusetts, and Oregon. Additional local sales taxes may apply in Alaska, California, Colorado, Nevada, and Washington in jurisdictions imposing such taxes.”

They missed local excises in California and Nevada, but I agree that Washington and Maine don’t have local excises. (Local sales taxes aren’t worth looking at.)  [UPDATE 16 October 2019:  WA lets localities add a that looks just like the WA excise tax, a percentage of price.  Call it a sales tax or an excise tax: I don’t see the difference.  So my distinction between sales and excise taxes is questionable.]

California is the state where local taxes are the biggest issue. Local taxes routinely pass when voters are asked about them. https://newrevenue.org/2016/11/10/5026/. Continue reading “Most legalizing states allow local cannabis excise taxes”

UPDATE, 30 March 2018:

On Twitter, Phil Hackney (@EOTaxProf ) has this and more:
“To be clear this is only a procedural document. It says the IRS will not issue a ruling on orgs claiming exempt status in as an org advancing a line of business if that business involves marijuana. Not the same as saying such orgs do not qualify; no need for such orgs to apply.”  https://twitter.com/EOTaxProf/status/979475478452035584

I agree that the IRS “no letter” rule for marijuana non-profits is of minor direct legal consequence. But people in cannabis community might understandably see this as
(1) deliberately singling them out;
(2) evidence of Administration antipathy – evidence of more to come.

ORIGINAL POST:

A recent IRS ruling, sent to me by Professor Francine Lipman of UNLV Law School, is making waves:  The IRS says it “will not issue a determination letter [about non-profit status] when the request concerns an organization whose purpose is directed to the improvement of business conditions of one or more lines of business relating to an activity involving controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law regardless of its legality under the law of the state in which such activity is conducted.”

“Improvement of business conditions” I don’t quite get. I’m confused. This is not my field. Off the top of my head:

I’m thinking of a distinction between trying to help people break a law and trying to change a law. Continue reading “Nonprofit status for marijuana groups”

California has a ploy to prevent the federal government from cracking down on medical cannabis. I think the state’s ploy is ill-considered and far-fetched.

Here’s the ploy:

“Reporting the cultivation tax:

“. . .

“– You are required to enter adult-use ounces separately from medicinal ounces for each category.”

https://cannabis.ca.gov/2018/ 03/13/important-information- for-cannabis-distributors/

Now I think one of the possible advantages of taxing medical cannabis like adult-use is that cultivators don’t have to decide which is which so soon.  Let the market decide, based on demand as time goes on. Otherwise, shortages and gluts will develop, as identical products have been put into a category that proved wrong. Continue reading “California Scheming”