Adult-Use Marijuana Now Legal and Available in Oregon; Will Their Tax Model Work Better Than Those of Other Legal Adult-Use States?

Adult use marijuana legal in Oregon

Adult-use marijuana officially became legal last week in Oregon. Adults can possess up to 8 ounces of marijuana in the home and up to 1 ounce outside the home as well as cultivate up to four plants per household. The state has until January of 2016 to put regulations in place for licenses to commercially grow and sell adult-use marijuana and dispensaries are expected to open late in 2016. Existing medical cannabis dispensaries will begin selling adult-use marijuana beginning in October of this year.

The state joins Colorado, Washington, Alaska and D.C. as states in which marijuana is fully legal. According to NORML, Oregon’s approach has been the most progressive in terms of quantity of possession and the state legislature quickly implemented the will of the voters.

Interestingly, Oregon won’t begin taxing adult-use marijuana until January 2016, and then the tax would be 17% statewide with city or county governments having the option to add up to 3% more for a 20% tax according to Oregon Cannabis Political Action Committee representative Geoff Sugerman.

With a little digging, anyone can see marijuana tax rates by state. In Washington State, taxes just rose from 25% to 37% for adult-use marijuana on July 1. After a year of selling medical and adult-use marijuana in the state, taxes brought in from sales added up to $70 million. That’s nearly twice what the state originally forecast for tax revenue for the first year of sales. Not only is tax revenue greater than expected, cannabis sales continue to increase dramatically each month.

In its first year of adult-use sales, Colorado generated $44 million in tax revenue and last year the state pulled in $76 million in tax revenue and business fees. That state collects 2.9% sales tax as well as a 10% sales tax on adult-use marijuana; on top of that, there’s a 15% excise tax on the average market rate of adult-use marijuana, and there’s local sales taxes too depending on the location of the store.

One would think all these tax dollars would be a good thing for state governments. But, in an article by Associated Press Reporter Kristen Wyatt written earlier this year, public officials face a big conflict—taxes may need to be lower to eliminate the black market. Marijuana consumers don’t necessarily buy from adult-use retail stores when medical cannabis is untaxed or if they can grow their own. Even in Colorado the marijuana black market exists.

According to a recently published survey by Convergex, a New York-based brokerage, revealed increased competition has led to a drop in marijuana prices and per-customer spending. Customers spend about $50 per visit now, about half of what they spent a year ago.

As the cannabis industry matures, sales trends are looking similar to traditional retail sales trends: increased sales around the holidays, a drop off after New Year’s, and more spending after tax refunds are mailed in April.

It will be interesting to watch how states handle taxing adult-use marijuana. A Marijuana Business Daily article today reported that Alaska plans to levy a $50 tax per ounce of adult-use cannabis sold and estimates a $5 million to $19 million collection on taxes.

We’ll have to wait to see what happens. Alaska is still working to create regulations around the process.

The cannabis industry is moving faster than anyone expected. Keep up with it with by enrolling in Oaksterdam University’s Cannabis Business Program. You’ll learn about cannabis business structures, taxation, legal issues and much more!


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