This is the fourth year in a row, since the legal sale of recreational cannabis first took place in the state of Alaska, that the industry has shown a significant bump in tax revenue –– this time by $5 million in the most-recent full fiscal year.
The tax on recreational cannabis sold in the state was part of Ballot Measure 2, passed in 2014, which legalized cannabis in Alaska. The tax is designated to be collected from licensed cannabis cultivation businesses. This year, revenue to be collected totals more than $24.5 million.
The tax is imposed when cannabis is sold or transferred from a cultivation facility to a retail store or product manufacturing facility. The initial tax was $50 per ounce of marijuana. But beginning in January of 2019, the tax rates split into more detailed categories. Now, mature bud or flower is taxed at $50 per ounce; immature or abnormal bud is taxed at $25 per ounce; trim is taxed at $15 per ounce; and clones are taxed at a flat rate of $1 per clone.
The industry has produced a steady bump in tax revenue every year since legalization. This year the bump was $5 million, the year before it was around $8 million, the year before that around $9 million.
Lacy Wilcox, president of the Alaska Marijuana Industry Association, says the bump could be due to a number of factors.
As the market has grown since 2016, the number of licensed grow operations has also increased.
“We’ve got a lot more cultivators these days, so the number of taxpayers has increased,” she said. “There’s definitely a number of new cultivators this year.”
It’s difficult to measure whether demand has increased, because this particular fiscal year has been abnormal due to the novel coronavirus pandemic.
“You would think there would be fewer consumers, but we haven’t noticed a slowdown,” Wilcox said. “This industry has remained pretty flat and steady through all of this.”
As it turns out, monthly tax revenue increased each month since the beginning of the pandemic in March. For example, tax revenue jumped by about $230,000 from March to April of this year. About half of that tax revenue was from the sale of bud and flower — more than 30,000 ounces of which was sold to distributors across the state.
Tax revenue increased an additional $169,000 from April to May and tapered off a bit to a jump of about $65,000 between May and June.
If that trend then correlates to consumer purchases, it’s clear that more recreational cannabis was purchased after everyone was instructed to stay home. Nothing like working from home in your pajama pants and being stressed about the state of the world to make you want to smoke more weed, right?
While it’s easy to assume that’s the case, Wilcox posited one other hypothesis for why sales have been increasing during the pandemic: Black market sales may be decreasing.
And by black market, we don’t mean the neighborhood dealers who grow for themselves and their friends. We’re talking about the folks who import hundreds of pounds from the Lower 48.
As travel restrictions were implemented, hunker-down orders were put into place and the public was instructed to limit interactions with others, these black market sales may have been passed up for a safer, more sanitary and more controlled setting like a local distribution shop.
Whatever the reason –– high consumption during a pandemic, increased legal sales over black market deals, or just a healthy growing market –– it’s clear to see Alaska’s legal cannabis industry is still blossoming.
Contact Alaska Cannabist staff writer Erin McGroarty at 907-459-7544 or emcgroarty@AlaskaCannabist.com.