The high retail tax imposed on marijuana in the recreational industry is nothing new. Residents, customers, and tourists have conveyed their frustration with the high prices of cannabis. But what is often overlooked is the entire taxation burden which is imposed on recreational marijuana stores.
We interviewed the owner of Cannabis City, James Lathrop recently, and published the exchange a couple weeks ago. When asked ‘What is the most challenging part of running Cannabis City?’ Lathrop replied with, “paying the HEAVY taxes imposed by I-502 and Federal Code 280e. These two laws put the taxation of the product at a compound rate of 85% (25% + 25% + 25% + 10%) at the state level, PLUS an additional 35% at the Federal level.”
When looking at the numbers published by the Washington State Liquor Control Board for the month of October 2014, it shows Cannabis Citys’ total sales at $632,878. The WSLCB also publishes the retail tax amount owed which, for this month was $158,220. It’s easy to look at these numbers and think, ‘not bad at all.’ But, the amount published by the WSLCB is only 25% of the equation. It’s just one side of the story. According to Lathrop, the total compounded tax rate imposed on recreational marijuana shops is at 85%!
If this is the case, Cannabis City’s total tax burden for the month of October is roughly $537,946. Which leaves less than $100,000, for the month, to pay producers for the product, pay for overhead, pay for the lease of the store, hire security, pay employees a decent wage, and maybe pay yourself?