Once their laws are fully implemented, adult-use marijuana programs have generated large annual surpluses from taxes and fees after accounting for the costs to administer the program. States have implemented adult-use regulatory programs for as little as $1.8 million (in Alaska). Adult-use states generated as much as $369 million (Washington) and $250 million (Colorado) in tax revenues in a single year.

Application fees vary by state, ranging from $250 to $5,000. Licensing fees vary by state and business type (i.e., cultivator, product manufacturer, producer, transporter, testing). These fees range from $1,000 (for a limited cultivation license in Colorado) to $200,000 (for a distributor license with greater than 120 million in operation in California). The revenues generated from application and licensing fees alone are upwards of $12.9 million (in Colorado)[1] and $5.4 million in Washington.


Colorado (population 5.6 million)


Colorado legalized marijuana for adults 21 and older when voters approved Amendment 64 in November 2012. On January 1, 2014, the state became the first with legal adult-use sales. Colorado had already developed a medical cannabis regulatory system before adult-use sales began in January 2014. Many businesses were able to transition to having both a medical and an adult-use sales counter. The adult-use marijuana program is regulated through the Marijuana Enforcement Division of the Department of Revenue.

In the current fiscal year, after deducting regulatory costs, Colorado will have generated a surplus of more than $250 million.

Licensing and Fees

As of March 1, 2019, adult-use marijuana business licenses had been issued to 716 cultivation facilities, 553 retail stores, 285 product manufacturers, 12 testing facilities, nine operators, and 15 transporters.[2] Additionally, the following numbers of individual occupational licenses were valid as of March 1, 2019: 1,666 associated key (owners), 13,426 key individuals (typically managers), and 26,725 other support staff.  

As of August 1, 2018, Colorado charges a $2,250 application fee plus a $250 fee to the locality for a medical marijuana business seeking to obtain a license to add an adult-use retail marijuana store. The fees for current medical businesses to also obtain an adult-use cultivation or product manufacturing license are both a $1,750 application fee plus $250 to the locality.[3] Current medical licenses can also be converted to an adult-use license, which requires a $250 application fee and a $250 fee to the locality.

For new adult-use marijuana retail stores, there is a $4,500 application fee plus a $2,500 fee due to the locality for those seeking to obtain a license. Licenses for new cultivation and product manufacturing businesses each require a $4,000 application fee plus a $2,500 fee due to the locality. There is a $2,000 application fee plus a $500 fee due to the locality to acquire a license as a marijuana testing facility, and a $2,700 application fee plus a $500 fee due to the locality to acquire a license as a retail marijuana operator. Finally, there is a $4,900 application fee plus a $500 fee due to the locality to acquire a license as a retail marijuana transporter (note this is for a two-year license).

Medical and adult-use marijuana business licenses must be renewed each year, with the exception of the retail marijuana transporter license, which is a two-year license.[4] There is an $1,800 application fee due for license renewal for the following licenses: retail marijuana store, product manufacturer, and retail marijuana testing facility. Additionally, there is a renewal fee of  $4,700 for a two-year retail transporter license and $2,500 for a retail operator license.

Taxation

The Colorado Department of Revenue began reporting adult-use cannabis tax collection data in February 2014, the month after adult-use marijuana sales began.

Colorado levies a 15 percent marijuana excise tax on all sales to consumers of adult-use marijuana, including infused products.[5] This tax rate increased from 10 percent in July 1, 2017, but at the same time, Colorado stopped applying the state’s standard 2.9 percent sales tax to adult-use cannabis.

There is also a 15 percent excise tax that is imposed on the first sale or transfer from an adult-use marijuana cultivation facility to a retail store or retail product manufacturing facility. Starting August 9, 2017, sales or transfers between licensed cultivation facilities are exempt from state excise tax.

Regulatory Costs and Revenue

The Marijuana Enforcement Division’s ongoing annual regulatory operational costs of the program, which includes staff costs and non-personnel expenses, are a little over $15.9 million for FY 2019.[6] According to the Colorado Department of Revenue’s 2018 annual report (July 1, 2017-June 30, 2018), adult-use marijuana sales generated $250,965,457 in tax revenue in FY 2018.[7] Additionally, $12,801,351 was generated from marijuana licenses and application fees in FY17-18, although that figure includes both adult-use and medical marijuana. Thus, after accounting for regulatory costs of the program, a surplus of roughly $246.9 million was generated in revenue from taxes and fees. 

Of the adult-use excise tax levied at the point of sale, 10 percent is allocated to local governments based on the percentage of such revenues collected within the boundaries for each local government.[8] The remaining 90 percent is allocated as follows: 71.85 percent to the Marijuana Tax Cash Fund for a variety of programs and services, 12.59 percent to the State Public School Fund, and 15.56 percent to the General Fund.

Additionally, the first $40 million of excise tax revenue generated annually from adult-use marijuana wholesale products is allocated to the Public School Capital Construction Assistant Fund. Anything over $40 million is allocated to the Public School (Permanent) Fund.


Washington (population 7.4 million)


With voters’ enactment of Initiative 502 in November 2012, Washington became one of the first two states, tied with Colorado, to legalize marijuana for adults’ use. Washington’s first adult-use sales began in July 2014, seven months after they began in Colorado. The Cannabis Licensing Unit of Washington’s Liquor and Cannabis Control Board (WSLCB) processes licensing for cannabis retailers, producers, processors, transporters, and researchers.  

In the most recent fiscal year, 2018, Washington’s cannabis fees and taxes generated more than $325 million after covering costs of regulating cannabis.

Licensing and Fees

As of December 2018, WSLCB had issued a total of 1,947 marijuana business licenses, including 504 retailers, 17 transporters, 1,205 producers, and 1,275 processors.[9] There is a $250 application fee to obtain a retail, cultivator, processor, or transport license.[10] Additionally, there is an annual fee for license issuance and renewal as follows: $1,480 for retail, producer, and processor licenses. There is no annual fee for transporter licensing, only the initial application fee.

Tax and Revenue

For fiscal year 2018, the WSLCB reported $42 million in total operating expenses, including $5.5 million for licensing, $15 million for enforcement, and $21.6 million for general operating expenses.[11]

The Liquor and Cannabis Board administers and collects a 37 percent marijuana excise tax on all taxable sales of marijuana, including marijuana concentrates and marijuana-infused products. The state’s standard 6.5 percent sales tax also applies. The Washington State Liquor and Cannabis Board’s annual report released for fiscal year 2018 (July 1, 2017-June 30, 2018) reported a total of $362 million was generated from marijuana taxes.[12] This was an increase of $46.8 million from FY 2017. Marijuana license fees brought in $5.4 million, an increase of  $1.5 million from FY 2017.

Thus, after accounting for regulatory costs of the program, a surplus of roughly $325.4 million was generated in revenue from taxes and fees in FY 18. As is the case in Colorado, this does not include local tax revenues.


Oregon (population 4.1 million)


Oregon voters approved an initiative regulating marijuana for adult use in November 2014, and the first adult-use stores opened October 2016. The legislature allowed medical cannabis dispensaries to sell a limited amount of marijuana (five grams) to adults from October 2015 until December 2016. Those sales were taxed at 25 percent beginning January 4, 2016. The temporary sales program ended January 2017. The state’s medical patients can now buy cannabis tax-free from adult-use retail stores. The Oregon Liquor Control Commission (OLCC) is the state agency charged with licensing and regulating the commercial growing and selling of adult-use marijuana stores.

Licensing and Fees

The OLCC began accepting applications in January 2016 for all license types —producers, processors, wholesalers, laboratories, and retailers. OLCC issued the first retail license in October 2016. As of February 20, 2019, OLCC reported: 1,115 active producer licenses, 210 active processor licenses, 606 active retail licenses, 147 active wholesaler licenses, and 21 active laboratory licenses.[13]

A non-refundable application fee of $250 is required for all license types. Additionally, license and annual renewal fees are as follows: producers
(Micro tier 1 — $1,000, Micro tier 2 — $2,000, Tier 1 —$3,750, Tier 2— $5,750), processors — $4,750, wholesalers — $4,750, retailers — $4,750, retailers — $4,750.[14] There is no numerical limit to the number of licenses that OLCC will be issuing, but it has put a hold on issuing further licenses due to concerns that supply has greatly exceeded in-state demand.

Taxation

The legislature revised the rate and method of taxation from the voter initiative, setting the base tax rate at 17 percent at retail. There are provisions under certain circumstances for cities and counties to add up to an additional 2 percent tax. In addition, the retailer can retain 2 percent of the tax covered to cover their expenses.[15]

The last three months of 2016 were particularly complex in terms of taxation. For the last quarter of 2016, there were two different tax rates in effect; once an adult-use business received a license from OLCC, the 17 percent tax rate was applicable, whereas if the business was still operating as a medical dispensary under OHA, the tax rate remained at 25 percent for recreational consumers.[16]

Regulatory Costs and Revenue

During FY 18, the OLCC reported $9,520,511 in administrative costs for the program.[17] That fiscal year, the Oregon Department of Revenue reported $82,203,729 in state marijuana tax revenue.[18] Additionally, $11,009,025 was generated from licensing and application fees in FY 18.*[19] After accounting for costs to administer the program, there is a surplus of $83.6 million generated from tax revenue and fees.

After deducting the state’s administrative costs, state revenue from marijuana tax is distributed as follows — 40 percent to the Common School Fund, 20 percent to mental health, alcoholism, and drug services, 15 percent to state police, 10 percent to cities for enforcement of the measure, 10 percent to counties for enforcement of the measure, and 5 percent to the Oregon Health Authority for alcohol and drug abuse prevention.[20]


Alaska (population 0.7 million)


Alaska voters approved an initiative to regulate marijuana for adults’ use in November 2014, making Alaska tied for third to legalize cannabis for adult-use. The state’s first adult-use stores opened in October 2016. The Marijuana Control Board of the state’s Department of Commerce, Community, and Economic Development is responsible for licensing and regulating the adult-use marijuana program.

Licensing and Fees

Application fees are set at a $1,000 fee for a new application, $1,000 fee for transfer applications, and $600 for renewal applications. Licensing fees are $5,000 for a standard cultivation facility, $1,000 for a limited marijuana cultivation facility, $5,000 for marijuana product manufacturing facilities, $1,000 for marijuana concentrate facilities, $1,000 for marijuana testing facilities, and $5,000 per retail marijuana store.[21]

Taxation

The Alaska Department of Revenue’s Tax Division collects the marijuana tax from licensed marijuana cultivation facilities. The excise tax on marijuana is $50 per ounce for any part of the bud and flower and $15 per ounce for any other part of the plant. Beginning January 1, 2019, there is also a rate of $25 per ounce for bud/flower that is considered to be immature or abnormal. The taxes are collected when cannabis is transferred from growers to product manufacturers or retailers.[22]

Regulatory Costs and Revenue

While ongoing regulatory costs continue to change each year as the Marijuana Control Board expands its staff, the regulatory costs of the program for FY 17-18 totaled $1,809,100.[23] License and application fees generated a total of $1,314,570 in FY 17-18. [24] According to the Alaska Department of Revenue, the state collected over $11 million in excise tax revenue for FY 17-18 (July 2017-June 2018).*[25] Thus, after accounting for regulatory costs of the program, a surplus of roughly $10.5 million was generated in revenue from taxes and fees that fiscal year.

Sales continue to increase as the adult-use cannabis industry matures, so this figure will surely increase in the next fiscal year. In calendar year 2018, the state collected $15.6 million in cannabis excise taxes, compared to $6.1 million in calendar year 2017.

The Department of Revenue deposits all revenue from marijuana taxes into the General Fund. Within the General Fund, a Recidivism Reduction Fund was established, and the Department of Administration separately accounts for 50 percent of the tax collected and deposits it into the Recidivism Reduction Fund.[26]


Nevada (population 3 million)


Nevada voters approved an initiative regulating marijuana for adult use in November 2016. The legislature and governor sped up the timeline for implementation and allowed medical cannabis dispensaries to sell to adults beginning July 1, 2017.

The state Department of Taxation is responsible for licensing and regulating both adult-use and medical marijuana businesses. For the first 18 months of the program, only existing medical marijuana establishments could apply for adult-use marijuana establishment licenses.[27]

Licensing and Fees

Currently, the numbers of operational adult-use (not medical) licenses include: 64 retail marijuana stores, 130 cultivators, 10 labs, 90 product manufacturers, and 35 distribution licensees.[28]

The department opened the application process to those not already holding a medical marijuana license from September 7, 2018 to September 20, 2018 for adult-use retail store marijuana licenses only. Conditional licenses were to be issued no later than December 5, 2018.[29] Winners of these conditional licenses have one year to obtain local approvals and pass a final inspection from the tax agency before being issued a final state license.[30] As of December 31, 2018, there were 61 conditional retail store licenses issued that are not yet operational.[31]

There is a $5,000 application fee to obtain an adult-use only retail store license.[32]  The application fee is also $5,000 for holders of a medical marijuana establishment license to acquire an adult-use license of the same type at the same location. In addition to the initial application fee, the annual licensing fees for each establishment are as follows; $20,000 for retail store, $30,000 for cultivation, $10,000 for production, and $15,000 for testing lab.[33]

Taxation

In the state of Nevada, retail marijuana is subject to the following taxes: 15 percent excise tax on wholesale sales paid by the cultivator, 10 percent excise tax on retail sales paid by the retail store, and local retail sales taxes.*[34] The 15 percent excise tax on the wholesale sale is calculated on the Fair Market Value at Wholesale established by the Department of Taxation.

Regulatory Costs and Revenue

In fiscal year 17-18, the actual program costs were $3.2 million, which includes both the costs for administering the medical and adult-use programs.[35] So far in fiscal year 2019 (July 2018-October 2018), application fees have generated $2.5 million and licensing fees have generated $2.3 million.[36] Revenue generated from application and license fees in FY 18 are more complicated, as there is no breakdown of medical versus adult-use fees through February 2018.

During Nevada’s first full year of adult-use sales (FY 2018, July 2017-June 2018), the state collected $69.8 million in marijuana tax revenue. The wholesale marijuana tax generated $27.3 million, while the retail marijuana tax generated $42.5 million.[37] After accounting for the costs of administering the program, a surplus of over $60 million was generated from tax revenue in FY 18.

The revenue generated from the 15 percent wholesale tax, in addition to the fee/penalties/assessments, is allocated as follows: first, funding is directed to the costs of administering the marijuana program. Then, $5 million per fiscal year goes to local governments. Finally, the remainder goes to the state Distributive School Account.


California (population 39.5 million)


California voters approved an initiative regulating marijuana for adults’ use in November 2016. In June 2017, the California Legislature passed SB 94, which integrated the medical and adult-use marijuana programs in the state. Now, a single regulatory system governs both the medical and adult-use cannabis industry. The Bureau of Cannabis Control is charged with the licensing, regulation, and enforcement of the following cannabis businesses: distributors, retailers, micro-businesses, temporary cannabis events, and testing laboratories. The state’s first adult-use stores began to open in January 2018.

Licensing and Fees

To date, the bureau has primarily issued temporary licenses, which do not require a licensing fee.[38] Once annual licenses are issued, the bureau will charge a $1,000 application fee for all license types. Additionally, the annual licensing fees are determined based on an estimate of the maximum dollar value of the planned operation. For example, a retailer with an estimate of up to $750,000 in planned operations costs will pay a $4,000 licensing fee.[39]

Taxation

Beginning January 1, 2018, cannabis (including medicinal and adult-use) is subject to a cultivation tax rate of $9.25 per dry-weight ounce of cannabis flowers, $2.75 per dry-weight ounce of cannabis leaves, and $1.29 per dry ounce of fresh cannabis plant.[40]

There is also a cannabis excise tax that is 15 percent of the average market price at the point of retail sale. In addition, there is a 7.25 percent standard sales tax rate, and local sales taxes also apply.

Regulatory Costs and Revenue

As of May 2018, the Bureau of Cannabis Control had an approved budget with a net total of $61,569,270 for calendar year 2019-2020, which includes staff costs and standard operating expenses.[41] The California Department of Tax and Fee Administration reported that the revenue generated from the first quarter of 2018 was $60.9 million — $32 million in excise taxes, $1.6 million in cultivation taxes, and $27.3 million in sales taxes. For the second quarter of 2018 (April 1-June 30), tax revenue from the cannabis industry totaled $74.2 million, including: $43.59 million in excise tax, $4.5 million in cultivation tax, and $26.3 million in sales tax.[42]


Other States


Massachusetts and Maine voters also enacted adult-use laws in November 2016, but they have not been fully implemented. In Massachusetts, the legislature rewrote the voters’ initiative, and a new regulatory board was developed. Sales did not begin until November 2018, and less than a dozen stores were open at the end of 2018. We do not yet have financial information for an implemented program.

Meanwhile, due to intransigence from then-Gov. Paul LePage, Maine’s implementation was greatly delayed, and neither regulations nor licenses have been issued yet.

Finally, Michigan voters approved adult-use legalization in November 2018, but the law has not yet been implemented.



[1] This figure includes both medical and adult-use licenses and fees.

[4] MED Business License Renewal, February 21, 2019, https://www.colorado.gov/pacific/enforcement/med-business-license-renewal

[6] Source: January 18, 2019 email with Shannon Gray of the Colorado Department of Revenue.

[7] Colorado Department of Revenue 2018 Annual Report, pg. 71, https://www.colorado.gov/pacific/sites/default/files/2018_Annual_Report.pdf

[8] Joint Budget Committee Appropriations Report Fiscal Year 2018-19, pg. 578.

[9] Washington State Liquor and Cannabis Board Marijuana Dashboard, https://data.lcb.wa.gov/stories/s/WSLCB-Marijuana-Dashboard/hbnp-ia6v/

[10] Washington State Liquor and Cannabis Board Marijuana Licensing, https://lcb.wa.gov/mjlicense/marijuana-licensing

[11] Washington State Liquor and Cannabis Board Annual Report Fiscal Year 2018, pg. 15 https://lcb.wa.gov/sites/default/files/publications/annual_report/2018-annual-report-web.pdf

[12] Washington State Liquor and Cannabis Board Annual Report Fiscal Year 2018, pg. 15 https://lcb.wa.gov/sites/default/files/publications/annual_report/2018-annual-report-web.pdf

[13] Oregon Liquor Control Commission Marijuana License Applications, February 20, 2019,  https://www.oregon.gov/olcc/marijuana/Documents/mj_app_stats_by_county.pdf

[14] Oregon Liquor Control Commission FAQ’: Licensing – General, https://www.oregon.gov/olcc/marijuana/Pages/FAQs-Licensing-General.aspx

[15] Oregon Liquor Control Commission FAQ’s: Taxes, https://www.oregon.gov/olcc/marijuana/Pages/FAQs-Taxes.aspx

[16] Statistic from Oregon Marijuana Tax Returns, Calendar year 2016, pg. 2, https://www.oregon.gov/DOR/programs/gov-research/Documents/marijuana-tax-report_2016.pdf 

[17] Source: Email with Madeline Kane of the Oregon Liquor Control Commission, January 16, 2019.

[18] Oregon Marijuana Tax Statistics: Accounting Information, Oregon Department of Revenue Research Section, January 24, 2019, https://www.oregon.gov/DOR/programs/gov-research/Documents/Financial-reporting-receipts-public.pdf

[19] Source: Email with Madeline Kane, Oregon Liquor Control Commission, January 16, 2019. *This number also includes other miscellaneous regulatory fees.

[20] Oregon Liquor Control Commission Recreational Marijuana FAQs: Taxes, https://www.oregon.gov/olcc/marijuana/Pages/FAQs-Taxes.aspx

[21] Department of Commerce, Community, and Economic Development, Alcohol and Marijuana Control Office, https://www.commerce.alaska.gov/web/amco/MarijuanaLicenseApplication.aspx

[22] Alaska Department of Revenue – Tax Division http://tax.alaska.gov/programs/programs/help/faq/faq.aspx?60000

[23] Source: Email with Erika McConnell, Director of the Alcohol and Marijuana Control Office, December 27, 2018.

[24] Source: Email with Erika McConnell, Director of the Alcohol and Marijuana Control Office, December 27, 2018.

[25] Alaska Department of Revenue, June 2018 Marijuana Tax Information, http://tax.alaska.gov/programs/programs/reports/monthly/Marijuana.aspx?ReportDate=6/2018 
*Note this is for cultivators only (not retail stores).

[26] Alaska Department of Revenue, Marijuana Tax 2017 Annual Report, http://tax.alaska.gov/programs/programs/reports/Annual.aspx?60000&Year=2017

[28] Source: Email with Stephanie Klapstein, Public Information Officer of the Nevada Department of Taxation, December 31, 2018.

[31] Source: Email with Stephanie Klapstein, Public Information Office of the Nevada Department of Taxation, December 31, 2018.

[32] State of Nevada Department of Taxation, Recreational Marijuana Establishment License Application, July 6, 2018, https://tax.nv.gov/uploadedFiles/taxnvgov/Content/FAQs/Recreational-Marijuana-Establishment-Application-7-2-18(3).pdf

[34] Marijuana in Nevada, http://marijuana.nv.gov/Businesses/Taxes/
*Note that marijuana or products sold to a patient cardholder are not subject to the 10 percent excise tax.

[35] Source: Email with Stephanie Klapstein, Public Information Office of the Nevada Department of Taxation, December 31, 2018.

[36] Source: Email with Stephanie Klapstein, Public Information Office of the Nevada Department of Taxation, December 31, 2018.

[37] State of Nevada Department of Taxation, June Marijuana Revenue Statistics, News Release August 28, 2018, https://tax.nv.gov/uploadedFiles/taxnvgov/Content/TaxLibrary/News-Release-June-Marijuana.pdf

[38] Source: Email with Angela McIntire of the Bureau of Cannabis Control, December 26, 2018.

[39] Bureau of Cannabis Control, Text of Regulations, pg. 17, https://www.bcc.ca.gov/law_regs/readopt_text_final.pdf

[40] California Department of Tax and Fee Administration, http://www.cdtfa.ca.gov/taxes-and-fees/tax-rates-stfd.htm

[41] Source: Email with Angela McIntire of the Bureau of Cannabis Control, December 26, 2018.
*Note that adult-use and medical programs are both regulated under BCC.

[42] California Cannabis Portal, August 15, 2018, https://cannabis.ca.gov/2018/08/15/cannabis-tax-revenue-increases-in-2nd-quarter-of-2018/. *Medical cannabis is exempt from sales tax if the purchaser holds a valid medical marijuana ID card. *Totals do not include tax revenue collected by each jurisdiction.

 

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