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Cities, counties want a share of the pot taxes

Reporters and pot-enthusiasts created a circus in front of Cannabis City, Seattle's first recreational pot store, on its opening day. Credit: Emily Wooldridge

Some cities and counties believe they should get more of Washington marijuana tax revenue.

Many local governments are happy, however, that a merged medical and recreational marijuana system with taxes and revenue sharing could be nailed down during this legislative session. And some cities like having the choice to cut a 1,000-foot marijuana business buffer zone to as little as 100 feet in some cases.

Several medical marijuana users believe any state excise tax will force them to go to the black market in order to afford medicinal pot.

Those views emerged from a Monday hearing by the Washington House Appropriations Committee on a marijuana taxation bill introduced by Rep. Reuven Carlyle, D-Seattle. This is a sister bill to legislation introduced by Sen. Ann Rivers, R-La Center, to merge Washington’s medical and recreational marijuana worlds under one regulatory system.

The Senate passed Rivers’ bill 36-to-11, and it now awaits a full floor vote bill in the House. Carlyle’s bill addresses the taxation and financial aspects of a merged marijuana system.

The biggest plank of Carlyle’s bill would significantly change how Washington taxes marijuana.

Right now, each wholesale and retail marijuana sale is charged a 25 percent state tax. That tax is normally charged three times — on the sale from the grower to the processor, on the sale from the processor to the retailer, and on the retail sale to a consumer. Those taxes are added into the prices charged to the processors and to the retailers — and, ultimately, to the consumers.

The trio of 25 percent taxes has increased the price of recreational marijuana in Washington, putting it as a competitive disadvantage to the loosely regulated medical marijuana market — which is not subject to the three 25 percent tax charges. Legal retail marijuana also competes with the black market, where no taxes are charged. Carlyle’s bill would eliminate the 25 percent taxes on the grower and processor sales, while bumping the retail tax from 25 percent to 30 percent.

Carlyle has speculated that the proposed tax changes will reduce the overall price of marijuana to customers. Other than a handful of medical marijuana users saying any taxes will be detrimental to sick people on fixed incomes, there have been few objections to the bill’s proposed excise tax changes.

“You’re going to force everyone to go to the black market,” contended Steve Sarich of the Cannabis Action Coalition. Medical marijuana patient John Kingsburn added, “There’s going to be a huge influx on the criminal justice system.”

Several people testifying at the hearing asked that medical marijuana patients be exempted from the 30 percent retail excise tax.

Carlyle’s bill includes other modifications to existing marijuana laws.

A new plank in the bill would allow a county commission or a city council to reduce the current state-required 1,000-foot buffer down to as little as 100 feet between a marijuana establishment and a recreation center, a child care center, a public park, and some other facilities. However, local governments would not be able to shrink the 1,000-foot buffer around schools and playgrounds.

Several city representatives praised that proposal, saying it is currently difficult to approve a location for a marijuana business under the present law. “We can’t locate a market in the densest Seattle. The black market is roaring on Capitol Hill,” said Phillip Dawdy of the Cascadia Growers Association.

“We like allowing cities to opt out of the 1,000-foot rule,” said David Mendoza, a policy adviser for the City of Seattle.

One part of Carlyle’s bill would distribute part of the marijuana excise tax revenue to cities and counties after $25 million in pot taxes reaches the state’s general fund in a single fiscal year. Then the state would distribute 30 percent of the year’s marijuana tax income to counties and cities whose businesses send marijuana taxes to the state. The counties would get 60 percent of that money, and the cities would get 40 percent.

Some cities and the Washington Association of Counties wanted the 30 percent distribution figure increased.

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