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Final Marijuana Legislation for 2015

July 2, 2015  by  Jim Doherty
Category:  Marijuana

Final Marijuana Legislation for 2015

On June 30, Governor Inslee signed 2E2SHB 2136 -- another significant piece of legislation amending the state’s marijuana regulatory system. The legislation (hereafter referred to as HB 2136) is 61 pages long and contains provisions that are important for local governments, for individuals operating licensed marijuana businesses, and for medical marijuana users. Its two most significant provisions, from my perspective, involve changes to the taxation of licensed marijuana businesses and to the authority of cities and counties to adjust some of the required buffer zones that were originally set by I-502. Both of these provisions are now (as of July 1) in effect.

Here are the highlights:

Tax Changes and Revenue Sharing

Excise tax. Instead of there being an excise tax of 25% at each of the three different stages (production, processing, and retailing), now there is a single excise tax of 37% imposed at the time of marijuana retail sale. See Section 205 of HB 2136. The excise tax is in addition to the state and local sales tax. Section 101 explains the basic reasoning behind the tax changes:

the legislature intends to reform the current tax structure for the regulated legal marijuana system to create price parity with the large medical and illicit markets with the specific objective of increasing the market share of the legal and highly regulated marijuana market.

Beginning in fiscal year 2018, if marijuana excise tax collection exceeds 25 million dollars, 30% of all marijuana excise taxes deposited into the general fund the prior fiscal year will be distributed to local governments as follows:

30% will go to counties, cities, and towns where retailers are located, based on the retail sales from stores within each jurisdiction;
70% will be distributed to counties, cities, and towns on a per capita basis – but only to jurisdictions that do not prohibit the siting of state-licensed producers, processors, or retailers.

See Section 206(2)(g) for the exact wording. The State Treasurer will make the transfers to local governments in four installments, by the last day of each fiscal quarter.

Sales tax. The legislation provides a retail sales and use tax exemption for marijuana purchased or obtained for medical use. See Sections 207 and 208.

Local Funding

The state budget provides for $12 million in funding for counties and eligible cities, $6 million in each fiscal year of the 2015-17 biennium. The funds appropriated in the budget are to be distributed according to a formula set out in Section 1603, based on retail marijuana sales, in four installments by the last day of each fiscal quarter.

Buffer Zones

Counties, cities, and towns are granted the authority to reduce the 1000-foot buffer zones required by I-502 (RCW 69.50.331(8)) around certain types of facilities within which licensed marijuana producers, processors, or retailers could not be located. The buffer zones can be reduced to not less than 100 feet from recreation centers or facilities, child care centers, public parks, public transit centers, or game arcades admitting minors. This authority to adjust buffer distances DOES NOT apply to elementary or secondary schools or to playgrounds. See Section 301(8).

Counties, cities and towns can also allow marijuana research facilities to be located not less than 100 feet of all of the above mentioned facilities, INCLUDING elementary or secondary schools, and playgrounds. A marijuana research facility is a newly authorized entity. See SB 5121 (Chapter 71, Laws of 2015).

Signage for Retail Stores

Licensed retail marijuana stores are now allowed to have TWO signs instead of the previous limitation to one sign. Each must be no more than 1,600 square inches in size. See Section 203(4).

Marijuana Use in “Public Places”

Section 401 clarifies what constitutes a “public place” where marijuana cannot be consumed, by incorporating the definition of “public place” found at RCW 66.04.010(35).

Transportation of Marijuana

Licensed producers, processors, and retailers can use common carriers for transport of marijuana, under rules to be adopted by the LCB. See Section 501.

Public Notice Requirements

Applicants for marijuana licenses must post a sign, provided by the LCB, on the outside of the premises to be licensed notifying the public that the premises are subject to an application for a marijuana license. The sign must be posted within seven days of submitting an application to the LCB. See Section 801.

Cities, towns, and counties may adopt an ordinance requiring that license applicants provide individual notice of their application to any of the following that are located within 1,000 feet: elementary or secondary schools, recreation centers or facilities, child care centers, churches, agencies that operate public parks, transit centers, or libraries, and arcades admitting minors. See Section 801. The notice must contain contact information for submitting comments to the LCB. The local government can require that these notices be sent at least 60 days before the license is granted.

Medical Marijuana Cooperatives

Section 1001 amends some of the provisions contained in the medical marijuana legislation (2SSB 5052), enacted during the regular legislative session earlier this year, which authorizes the establishment of LCB-certified “cooperatives” in place of collective gardens. This section establishes buffer zones within which cooperatives may not be located and makes it clear that cities, towns, and counties may prohibit cooperatives within their jurisdiction. It will not be effective until July 1, 2016, to coincide with the effective date of the provisions in 2SSB 5052 dealing with cooperatives. See my recent post, Medical Marijuana Reform Legislation Enacted, for information on 2SSB 5052.

Vending Machines and Drive-Up Windows

Marijuana retailers may not have marijuana vending machines within their stores, nor may they have drive-up windows. See Section 1301.

Effective dates

Most sections of HB 2136 are effective July 1st of this year – meaning they’re already in effect! The sections now in effect include those involving the tax revisions and the authorized changes to buffer zones. A few sections are effective on July 24, 2015, some on October 1, 2015, and some on July 1, 2016. See Section 1605 for effective dates.

Keeping up with all of the marijuana legislation this year is a task. Our Legislature has done an admirable job this year, particularly compared to last year, when no marijuana-related legislation was enacted. Initiative 502 was comprehensive in its original scope, but it is not surprising that the law has needed adjustment. Moving marijuana from a prohibited substance to a regulated enterprise, without having any existing models to emulate, has taken a lot of bold and creative thinking. Additionally, the LCB has been working feverishly to adopt a broad array of regulations while simultaneously processing thousands of applications (many submitted by individuals with little experience interacting with a complex regulatory system).

Though there will undoubtedly be future adjustments to our state’s regulatory model, we now have a fairly comprehensive system in place. Over the coming year, medical marijuana will be folded into the existing recreational marijuana system, and many of the glaring disparities will be eliminated. It is expected that much of the black/gray market will gradually wither as people go to licensed stores to obtain tested and properly labeled product. No system is perfect, and more still needs to be done as the regulated marijuana industry matures, but we have come a long way.

Image courtesy of erocsid.

MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.

About Jim Doherty

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



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