Cannabis Tax Intel

Article: Marijuana Taxes Keep Black Markets Thriving

Published

2 years ago

March 22, 2023

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Twenty‐one states have legalized some amount of marijuana for recreational use, and sixteen more allow marijuana for medical use.

Critics claim black markets remain despite legalization. This is true — because legalization has been accompanied by excessive taxation and regulation.

California’s legal marijuana industry, for example, has a tough time competing with the black market. The state’s illegal sales approach $8 billion annually, twice legal sales.

It’s not difficult to see why. Retailers must pay a $1,000 application fee and a minimum $2,500 licensing fee annually, and sales are taxed at about 38 percent (combining all applicable taxes). This causes the price of legal marijuana products to exceed that of illegal products by two to three times.

Moreover, California and other states allow municipalities to ban marijuana retail shops, further perpetuating black markets.

New York has a similar problem. Sales are taxed at a combined rate of about 45 percent. Illegal sales are still the norm despite legalizing recreational marijuana two years ago. A legislator who sponsored NY’s legalization bill said she “didn’t think this was going to happen.”

This should have been clear. Wherever there are high taxes, there are black markets.

This phenomenon is not limited to marijuana. New York imposes one of the highest taxes on cigarettes in the nation — $4.35 per pack. Consequently, over 53 percent of cigarettes sold in NY are smuggled. The governor wants to raise taxes by $1 per pack and ban flavored cigarettes. Researchers estimate this will increase the smuggling rate to 66 percent and thus reduce tax revenues by $167 million.

Black markets not only hurt tax revenues, but hurt people too. Black markets encourage violence and drive overdoses, especially for high potency drugs. Decriminalizing drug use in Oregon without legalizing supply has proven ineffectual in reducing the harms of black markets.

Legalizing marijuana, but with heavy taxation and regulation, is not enough to reduce black markets either. Legislators can raise revenue and avoid costly enforcement activities by legalizing marijuana without imposing excessive taxes.

Source: https://www.cato.org/blog/marijuana-taxes-keep-black-markets-thriving

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Cannabis Tax Intel

Maryland: Senate recreational cannabis bill differs from House bill over taxes

Published

2 years ago

March 29, 2023

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WBAL TV

The Senate’s bill to map out the legalization of recreational marijuana in Maryland differs greatly from the House proposal over taxes.

Legislation making recreational cannabis legal in Maryland still has a long way to go in a relatively short period of time. And, changes made by the Senate Finance Committee could set up a showdown between the House and Senate.

But legislative leaders put an optimistic spin on the changes, calling the differences minor and will be easy to resolve.

“This is one of those bills that everyone has just one more idea. So, the faster we can get to a place of resolution, I think will be better for everyone,” said Senate President Bill Ferguson, D-District 46.

Early this month, the House gave preliminary approval to House Bill 556, which would tax and regulate marijuana.

Under the Senate version, Senate Bill 516, it would cost Marylanders more to recreational marijuana use. The sales tax would go up from 6% to a 9% flat tax, and local governments would be allowed to tack on an additional 3% sales tax.

“While it’s not perfect, I think it offers enough good points for us to be able to move the bill forward,” said Sen. Clarence Lam, D-District 12, whose district encompasses portions of Anne Arundel and Howard counties.

Under the House bill, cannabis would be taxed at 6% for the first year and increase by 1% each year until 2018. It would be capped at 10%.

The Senate bill would still allow people to possess up to 1.5 ounces of cannabis, and current medical cannabis businesses would be allowed to convert their licenses to recreational before July 1.

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Cannabis Tax Intel

New law could increase taxes on cannabis sales in Montana

Published

2 years ago

March 29, 2023

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BILLINGS, Mont. — In the state legislature cannabis is once again taking center stage. This year, a proposed bill is seeking to undo almost all of the policy changes that were voted into effect by Montanans.

If this Bill were to pass, it would have a major impact on those who not only use cannabis recreationally but also impact the business owners and employees of Montana’s dispensaries. Zack Schopp, owner of Seed of Life Labs in Billings said the ripple effects of a law like this — would go beyond the marijuana industry.

“It’s detrimental to the business, to the employees of those businesses, to those government regulators who are employed, to the contractors of the building, to the real estate agents that are selling property. All of that economic opportunity that’s been created from cannabis is at stake with a Bill like that, there are over 5,000 Montanans who have jobs in the cannabis industry here, you know, what am I supposed to say to them if this goes through,” said Schopp

His business is just one of more than 40 dispensaries in the area according to the department of revenue, Yellowstone County generated an estimated $4,000,000.00 in Tax revenue in February of 2023.

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Cannabis Tax Intel

New Jersey Moves to Remove State’s 280E Tax Code

Published

2 years ago

March 29, 2023

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Via Cannabis Industry Jnl – very intreresting development as and when Murphy signs off on it

The New Jersey legislature recently approved legislation that would allow licensed cannabis businesses to deduct ordinary business expenses on their state tax return that they are prohibited from deducting on their federal tax return, and such legislation has been sent to Governor Phil Murphy to potentially sign into law. This relates to the universally dreaded (among those in the cannabis industry, at least) Section 280E prohibition. This legislation is important because it would change current law to allow legal cannabis businesses in New Jersey to operate on more of a level playing field with other businesses in the state.

Cannabis operators and applicants are penalized by their inability to deduct certain expenses on their state and federal tax returns. The cause for this frustration is twofold. First, under federal law, cannabis is considered a Schedule I controlled substance under the Controlled Substances Act, 21 U.S.C. § 801 (CSA). Second, under IRS Tax Code Section 280E, cannabis businesses that are legal under state law are still considered drug traffickers for the purposes of federal tax law. While a related issue that is often considered along with Section 280E is whether or not it is sound public policy to continue to classify cannabis as a Schedule 1 drug, that is beyond the scope of this article.

While New Jersey’s legislators can’t change federal tax code, they are taking action to revise New Jersey’s tax code to level the playing field. Let’s hope the Governor signs into law the pending New Jersey legislation to decouple New Jersey’s tax law from Section 280E.

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