skip navigation

“Unconfusing” Marijuana Tax Distribution


October 24, 2016 by Jim Doherty
Category: Revenues , Marijuana

“Unconfusing” Marijuana Tax Distribution

I suspect that only those who enjoy accounting can easily understand RCW 69.50.540, the statute that provides the details on marijuana excise tax appropriations and distributions. Here’s my attempt to provide a compressed, simplified version of the statute.

For 2017 legislative budget information on the distribution of tax revenue to local governments, see Taxing Marijuana and Revenue Sharing.

Background

The state excise tax on retail sales of marijuana was significantly changed in 2015 by amendments made to RCW 69.50.535. There is now a 37% state excise tax on all retail sales made at state-licensed marijuana stores. That excise tax revenue is increasing in a very dramatic fashion. For example, according to the Liquor and Cannabis Board’s (LCB) October 17, 2016 “Weekly Marijuana Report,” retail sales of marijuana are in excess of $4,300,000 per day. Just a few months ago, retail sales were around $3,000,000 per day. For the latest retail sales data, see the LCB Monthly Marijuana Dashboard.

Two significant factors fueled this rapid increase:

  1. The prohibition of what used to be called “medical marijuana dispensaries”(as of July 1st all sales of both recreational and medical marijuana must be done at licensed stores); and
  2. The drop in per gram prices at retail stores dramatically reduced illegal sales (hard data on that is hard to come by, but that’s what I’ve heard).

If you do the math on the per day marijuana excise tax obligation, it comes to over $1,500,000 per day. That’s a big chunk of change for a state that will be struggling with significant revenue issues during the coming legislative session, including state funding of public education.

Impact on Local Governments

The good news is that cities and counties share in the state marijuana excise tax revenue. The bad news is that even though the marijuana tax revenue is rising, RCW 69.50.540(2)(g)(iv) caps the amount shared by cities and counties at $15 million for fiscal years 2018 and 2019, and $20 million per fiscal year thereafter. Assuming—conservatively—that the per day marijuana excise tax obligation remains approximately $1,500,000 per day, that means that the state should be collecting nearly $550,000,000 in marijuana excise tax revenue per year by 2018, and that amount could be even more if retail sales continue to increase so dramatically.

Revenue Sharing

The city and county share of the state marijuana excise tax revenue is split as follows:

  • 30% to cities and counties where marijuana retailers are located—with the distribution based on sales from within each jurisdiction; and
  • 70% to cities and counties on a per capita basis, with counties receiving 60% of this portion (funds can only be distributed to local governments that do not prohibit the siting of state-licensed marijuana producers, processors, or retailers).

Counties, cities, and towns can use the MRSC State Shared Revenue Estimator to review the projected amount that each jurisdiction will be receiving from the local government share of marijuana excise tax revenue during the coming year.

State Use of Marijuana Excise Tax Revenue

There are a slew of provisions within RCW 69.50.540 that set out the annual state expenditures of marijuana excise tax revenue, including:

  • $125,000 to the Department of Social and Health Services (DSHS) for a survey (conducted at least bi-annually) on youth and family attitudes toward marijuana use and related behavior;
  • At least $1,250,000 to the LCB for administration;
  • During fiscal year 2016, $23,750 to the state Building Code Council for provisions related to marijuana processing and extraction facilities;
  • A minimum of $25,500,000 to DSHS’s division of behavioral health and recovery aimed at prevention and reduction of maladaptive use of substances;
  • $1.6 million dollars to the University of Washington and Washington State University for research on the short and long term effects of marijuana use;
  • 50% of the balance to the state basic health plan;
  • 5% of the balance to the Washington State Health Care Authority to be expended exclusively through contracts with community health centers; and
  • A minimum of $511,000 to the Superintendent of Public Instruction to fund grants to building bridges programs.

Future Appropriations?

Keep in mind that as the revenue grows, so do the needs of state and local governments. The marijuana excise tax is one of the few new taxes in recent years—and it is certainly a standout in regard to the rate of growth. There will be ongoing discussions at the Legislature regarding how the marijuana revenue is distributed, and your local government associations will be at the Legislature representing your interests.

Have a question or comment about this information? Have another topic you’d like to see a blog post discuss? Let me know below or contact me directly at jdoherty@mrsc.org.

About Jim Doherty

Jim has over 24 years of experience researching and responding to varied legal questions at MRSC. He is the lead attorney consultant and has special expertise in transmission pipeline planning issues, as well as the issues surrounding medical and recreational marijuana.

VIEW ALL POSTS BY Jim Doherty

Comments

Blog post currently doesn't have any comments.

0 comments on “Unconfusing” Marijuana Tax Distribution

 more

Blog Archives

GO

Follow Our Blog