Staying the Course in Washington State’s Cycle of Ever Changing Marijuana Regulations

How Seattle-Based Contender Gardens, LLC, Stays Focused on Success

Casey Connell, owner of Contender Gardens, LLC, in Seattle, Washington

Casey Connell, owner of Contender Gardens, LLC, in Seattle, Washington

Oaksterdam University alumni are some of the most knowledgeable and experienced professionals in the cannabis industry. Casey Connell, owner of two Seattle-based commercial cannabis supply businesses, is one such alum. He has completed OU’s Horticulture and Cannabis Business seminar tracks within the last four months.

Connell began growing cannabis in his garage in 2001 and officially started Contender Agriculture as a nonprofit collective in 2012, focused on donating cannabis medicine wholesale to dispensaries. He’s been fortunate. Within six weeks of his very first harvest, he had sold out of product and found a base of good customers at the same time. Connell provides top shelf cannabis and his customers have stayed loyal to him.

Washington’s medicinal cannabis market has never been regulated the way adult-use cannabis is in his state. In 1998, there was no oversight of the medicinal businesses and no taxation on product; a “grey area” is perhaps the best description for any guidelines put in place.

In November 2012, Washington State residents passed Initiative 502 (I-502), legalizing small amounts of marijuana products for adult-use and making them taxable. In July 2014, just a few retail stores were selling adult-use marijuana. As of July 2015, the state has about 160 shops open, tax revenues have soared past expectations and sales top $1.4 million per day.

That sounds great, right?

According to Connell, the taxation structure in the State over the last year was a bit steep. A 25% excise tax was applied at the each transaction level—from producer to processer, processer to retail, and retail to customer—totaling up to an to an overall 75% taxation.

“Just this month that high tax rate was dropped to 37% at the retail to customer level,” said Connell. “Though it may seem like the customer is getting the brunt of the taxation, this new approach is going to be better for the overall industry. That tax cost will filter down so all of us pay less compared to last year’s taxes. ”

This tax reform was made possible by House Bill 2136, which also allows cities and counties to benefit from a slice of the taxation pie if they welcome marijuana businesses into their jurisdictions. Over the past year, how I-502 is interpreted has led to much litigation. Some local governments have prohibited marijuana businesses claiming I-502 should be interpreted like the state’s liquor laws, after which the Initiative is modeled and which explicitly allows local governments to be ‘dry.’ On the other side, marijuana businesses claim that because the I-502 contains no provision, the state is the sole authority to regulate cannabis in the state.

“These new regulations should help define where marijuana businesses can set up,” said Connell. “Any city or county that wants to prohibit cannabis businesses won’t see any tax revenue from marijuana sales.”

Tax reform is just one regulation change in the Evergreen State.

“I-502 was written to allow regulation changes by the Liquor and Cannabis Board,” said Connell. “Some businesses simply can’t meet, or keep up with, the constant changes. It requires constant research and can be costly. Growers and stores without deep pockets or steady cash flow are closing here every week.”

Connell welcomes the challenges of change. After nearly a decade and-a-half of experience as a medicinal grower, he saw the writing on the wall in 2013 and applied for a license for Contender Gardens, LLC, a for-profit cannabis supply company serving the adult-use segment.

“Because medicinal cannabis dispensaries and other businesses were not licensed or regulated,” said Connell. “There was an outcry from adult-use licensed business owners and supporters of I-502 for an across the board treatment of all cannabis businesses.”

He goes on, “I’m glad I got in when I did. Most dispensaries are now going to close.”

Connell understands the Liquor and Cannabis Board’s position. He’s a member of a cannabis business group that regularly meets with the Board to share insights about the cannabis industry.

“Overall the Board wants to improve the process, make it safer and easier for everyone,” said Connell.

So, all of this change….is it worth it?

“Yes,” he said. “My passion is to help people. When I see people benefit from cannabis, it gives me purpose and satisfaction. If it were easy, I probably wouldn’t do it.”

Connell went on, “Right now the market is unstable. But, eventually, it will stabilize. There are great things yet to come.”

Contender Gardens, LLC, Owner and Oaksterdam University Graduate Casey Connell Reflects on OU Seminars:

“You can’t put a price on the networking opportunities available at an Oaksterdam University seminar. They are so valuable.  I’ve met fellow commercial growers, entrepreneurs, investors … all kinds of professionals from around the country.”

“I love to learn. Going to the seminars helped me confirm what I do know and introduced me to new techniques and approaches.”

“Both seminars gave me added credibility in the cannabis industry. Oaksterdam certification is recognized in this industry; it really can make a difference.”

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