Long-requested changes to the state of Alaska’s cannabis taxing structure are at the top of the governor’s special task force on marijuana but it’s far from the only item on a list of requests aimed at updating the state’s laws to support a growing industry.
The 16-page report, which was published in early January, calls for a reworked taxation system, to redefine marijuana and hemp as one plant to address growing conflicts between the two, and for an overhaul of the state’s regulatory system, among other changes. It was the product of a 13-member Governor’s Advisory Task Force on Recreational Marijuana that included industry members, regulators and state officials.
“It was a fairly heavy lift in such a short amount of time,” said task force co-Chair Brandon Emmett, of Fairbanks’ Good Titrations. “We established what we saw were the problems with the cannabis industry, we had some lively debate about a path forward and then we put our heads together and got to writing.”
The document stands as a clear snapshot of where Alaska’s marijuana industry stands nearly a decade after voters approved its legalization and six and a half years after the first businesses opened their doors to customers. While there are many issues that are pinching the industry, it’s the state’s tax system that’s largely unchanged from what voters approved in 2014 that leads the concerns.
“I think anyone who has paid attention to the issue can see Alaska has not only the highest tax rate but also one of the most archaic,” Emmett said.
Alaska charges a $50 flat tax per ounce, $800 per pound, of flower regardless of its quality, potency or final sale price. Since its inception, there have been some changes around the edges like charging a lower rate on immature flower and trim, but for the most part nearly all flower falls under those tax rates. It’s made for a headache for growers, who are the ones that pay the tax.
“It doesn’t work for an agricultural good as prices fluctuate,” he said. “We’ve gotta tackle these taxes and take it off the grower.”
Emmett also noted that putting the rate on growers, whose business comes in cycles with crops, is difficult from a cash-flow perspective. While retailers have a constant stream of income to pay taxes with and to cover the cost of doing business, growers will only see infusions of cash every few months when they sell a crop. In the concentrate world, the flat tax also makes producing products that require fresh marijuana — such as live rosins and sifted flower — cost prohibitive for most businesses because they’ll end up paying that tax rate on the water in the plants.
The report's proposed solution would move marijuana taxes to the retail side at a 3% sales tax as well as expanding the definition of what is covered by the sales tax. Critically, it would pull industrial hemp into the same realm as cannabis so they would share the same rules and regulatory agency. Emmett said that’s particularly important because some hemp growers have worked out ways to concentrate the low amounts of THC into psychoactive products. That’s seen potent, hemp-derived THC products such as gummies that are essentially the same product you’d find in a cannabis retail store on gas station shelves, outside of the realm of state cannabis regulators and the existing tax system.
“We need marijuana to have much lower tax scheme, that’s just bar one. We’re overtax and it’s hurting the industry. We’ve paid our dues, that needs to be slashed,” he said. “But when we look at hemp and marijuana regulations here in the state, we see how completely different they are. What we want to see is that everything becomes cannabis because it’s truly one plant, specifically when you’re talking about for human consumption.”
With the Alaska Legislature coming to grips with another year of a deficit north of $300 million, Emmett said he’s hopeful that the expansion of the law to cover hemp would expand the base for the tax structure and leave a relatively minor impact on the state’s financial picture. And while marijuana taxes have consistently grown, they only account for about $30 million of the several billions of dollars the state generates in revenue each year. It’s still a drop in the bucket.
Some of the other proposed changes include:
· Redefining marijuana and hemp as one plant, cannabis
· Creating a single regulatory authority for cannabis
· Creation of a distribution license in the state, which would create a system to help track and trace any hemp-derived products arriving in Alaska
· Increased collaboration between Alaska’s regulators and others
· Unify the definition of marijuana across all statutes, including criminal law
· Extension of the task force of similar committee to continue to monitor the needs of the industry
· In the event that federal legalization comes to pass, enact license limits and put a 12-month moratorium on new licensees. It’d be aimed at protecting Alaska’s industry from a “quick takeover” by Outside forces
· Direct more marijuana tax revenue to the regulators, ensuring more prompt handling of business concerns and licensing issues.
· Allow for product transfers between all license types, which would allow unsold products or products requiring a recall to be returned to growers or manufacturers rather than be thrown out as waste.
· A biennial renewal of licenses instead of the annual renewal requirement. This would put the cannabis industry on the same level as the alcohol industry.
· Don’t put an age restriction on non-intoxicating hemp-derived products.
· Create a method for growers to test product in-state for heavy metals and pesticides. Because of the federal prohibition to transfer product between states, growers, retailers and customers are currently flying blind when it comes to contamination in cannabis flower. Here, they’re seeking help from the Department of Environmental Conservation to set up an accessible testing system for contaminants.
· Create a pathway for cannabis research to be done at the University of Alaska, as well as courses that focus on the business- and cultivation-sides of the industry.
As of print time, the report had been provided to the governor’s office and was in the process of being reviewed. Emmett says he expects Gov. Mike Dunleavy to take the report and put together a legislative package for legislators to consider during the current legislative session.
And where legislators once considered measures that would have been antagonistic to the industry, Emmett says legislators’ view on the industry has radically changed since legalization.
“First and foremost, I think legislators who may have not voted for the initiative initially have seen that the social ills that the marijuana opponents brought to the table during the campaign just haven’t happened,” he said. “We haven’t seen an uptick in violent crime, there hasn’t been a surge in DUIs, and we haven’t had any children die from accidentally consuming their parents’ marijuana edibles. People are realizing that it’s always been here, we’ve just taken a majority of the industry from the black market. There’s still work to do, hence the changes on the tax changes, but we’ve taken a significant percentage of the marijuana market and have brought it out into the open and people can see this falls somewhere between coffee and alcohol, and Alaskans are fine with both.”
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