Illinois: Pritzker Administration Announces Revenue Figures For First Month Of Adult Use Cannabis

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ILLINOIS: The Illinois Department of Revenue announced that adult-use cannabis sales generated $7,332,058 in cannabis tax revenue during the month of January, with an additional $3,147,928.29 generated in retail sales tax revenue. Governor Pritzker’s recently released budget conservatively estimated the state would collect $28 million in cannabis tax revenue during the remainder of the fiscal year, ending June 30, 2020. Today’s announcement puts the state on track to surpass that estimate.

Once administrative fees are accounted for, 45% of the adult-use cannabis tax revenue will be reinvested in communities disproportionately impacted by the failed war on drugs and used to fund substance abuse and mental health programs. The $3,147,928.29 in sales tax revenue will be divided between the state’s general revenue fund and the local governments where purchases were made.

“Today marks another milestone in the successful launch of Illinois’ legal cannabis industry. Our goal has been to build the nation’s most socially equitable program that includes new opportunities for the communities most harmed by the failed war on drugs. Revenue raised in this first month will soon begin flowing back into those communities to begin repairing the damage done by the failed policies of the past and creating new opportunities for those who have been left behind for far too long,” said Toi Hutchinson, Senior Advisor to Governor Pritzker for Cannabis Control.

The state collects cannabis revenue in two ways: a variable excise rate dependent on THC potency and type of product, and a 7% cultivators excise tax imposed on the sale of cannabis to retailers. Earlier this month, the state announced that over $39 million in adult-use cannabis product was sold at retail stores.

Last Wednesday, Governor Pritzker released his Fiscal Year 2021 budget, which projected cannabis sales would generate $28 million in cannabis tax revenue for the remainder of Fiscal Year 2020 (ending June 30, 2020). As the industry matures, revenues are estimated to grow to $127 million in FY21, of which $46 million will go to General Funds.

Background:

CANNABIS TAX RATES

• Cannabis Cultivation Privilege Tax:

o 7% of the gross receipts from the sale of cannabis by a cultivator or a craft grower to a dispensing organization

• Cannabis Purchaser Excise Tax:

o 10% of the purchase price – Cannabis with a THC level at or below 35%
o 20% of the purchase price – All cannabis infused products
o 25% of the purchase price – Cannabis with a THC level above 35%
o This tax is not imposed on cannabis that is subject to tax under the Compassionate Use of Medical Cannabis Pilot Program Act.

ALLOCATION OF STATE REVENUE

• Minus administrative costs, the remaining state revenue will be allocated as follows:

o 35% for the General Revenue Fund,
o 25% for the Criminal Justice Information Projects Fund to support the R3 program,
o 20% for the Department of Human Services Community Services Fund to address substance abuse and prevention, and mental health concerns,
o 10% for the Budget Stabilization Fund to pay the backlog of unpaid bills,
o 8% for the Local Government Distributive Fund to support crime prevention programs, training, and interdiction efforts, including detection, enforcement, and prevention efforts, relating to the illegal cannabis market and driving under the influence of cannabis, and
o 2% for the Drug Treatment Fund to fund public education campaigns and to support data collection and analysis of the public health impacts of legalizing the recreational use of cannabis.

Harborside Strikes Back, Wins Big In Tax Court

U.S. Tax Court Declines to Issue Penalties in Harborside 280E Case, Saving Industry Tens of Millions

CALIFORNIA: In a historic landmark decision that will save Harborside and the legal cannabis industry millions of dollars, the U.S. Tax Court has ruled that the California dispensary is not liable for accuracy-related 280E penalties. 280E is a tax code provision that denies all standard business deductions to businesses whose operations “consist” of activities that violate the Controlled Substances Act.

According to the Opinion issued by the Court, Harborside acted “reasonably and in good faith” when taking its tax positions for the years at issue. The Court cited Harborside’s timely filing of its tax returns and its maintenance of accurate financial records as a key strength, along with a persuasive argument from Harborside co-founder and Chairman Emeritus, Steve DeAngelo, that he made good-faith efforts to comply with the law, despite a lack of clear legal authority to guide medical marijuana dispensary taxpayers.

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The ruling comes just a few weeks after the same Court ruled that 280E itself does apply to Harborside — a ruling Harborside intends to appeal to the U.S. 9th Circuit Court of Appeals.

“We’re still working on knocking out 280E entirely, but at least for now we have established that cannabis businesses who operate in reasonable, good faith compliance with existing law will not suffer from additional unjust penalties,” said DeAngelo. “This ruling could save the legal cannabis industry tens of millions of dollars— dollars that ultimately come out of the pockets of cannabis consumers. What we are asking for is simple and fair: for the IRS to treat us like every other legal, tax paying business in the United States. Since the IRS has made it clear they are unwilling to do that on their own, Congress should step in and pass clear 280E reform legislation.”

The decision highlights Harborside’s historic role as an advocate and defender of the legal cannabis industry, and is just one of several victories it has scored since its founding in 2006. “Harborside never has, and never will, give up in its pursuit of justice for cannabis consumers and the legal industry that serves them,” said DeAngelo.

In 2016, the U.S. Department of Justice gave up on a years-long attempt to seize the properties where Harborside does business, dismissing a pending civil forfeiture action initiated 2012, when California’s four U.S. Attorneys mounted a statewide campaign to shutter California’s medical cannabis industry. The campaign had succeeded in closing 600 dispensaries— one third of the dispensaries in the state—but ended after Harborside won multiple legal victories in both state and federal courts.

“The penalties ruling strengthens Harborside’s financial position and helps clears the path for future industry growth,” said Andrew Berman, CEO of Harborside. “It’s a huge win for Harborside and the entire cannabis industry. We applaud the Court’s well-reasoned opinion, and appreciate the Court recognizing our commitment to compliance and operating in good faith.”

New Jerseyans Support Marijuana Legalization, Expungement, Taxation

Large majorities believe legalization will help state’s economy, areas in state with high marijuana arrest rates

NEW JERSEY: New Jersey legislators haven’t decided whether to legalize cannabis for personal use, but the latest Rutgers-Eagleton Poll shows more state residents favor than oppose – by a hefty margin of 58 percent to 37 percent – completely legalizing the possession and personal use of recreational marijuana.

Garden State opinions have been changing in recent years: almost one-third of those who currently favor legalization say they used to oppose it. Moreover, most view legalization as an issue of social justice – 79 percent believe individuals penalized for possessing a small amount of marijuana should be allowed to clear their records.

The poll also finds:

  • Half of all adults admit to having tried marijuana; one-quarter say they would consider using it if legalized.
  • The vast majority of New Jerseyans believe the sale, regulation and taxation of recreational marijuana would help the state’s economy; most (64 percent) say they would not be bothered if a store selling marijuana opened in their town.
  • By a 45 percent to 12 percent margin, more people think marijuana is less rather than more harmful than alcohol.

“As marijuana legalization approaches reality in the state, New Jerseyans are fully on board,” said Ashley Koning, assistant research professor and director of the Eagleton Center for Public Interest Polling (ECPIP) at Rutgers University–New Brunswick. “Support has built up slowly in the past five decades, with this being the first time a majority has ever sided with legalization. New Jerseyans are now almost three times as likely to support it as they were in 1971.” Koning noted that a national Gallup Poll conducted in early October likewise found 66 percent of all Americans favored the legalization of marijuana.

Results are from a statewide poll of 1,006 adults contacted by live callers on landlines and cell phones from Oct. 12-19. The sample has a margin of error of +/-3.6 percentage points. Interviews were done in English and, when requested, Spanish.

The Clinch On Cannabis: Immature Industries Eventually Grow-Up

By Beau Whitney, Whitney Economics

The cannabis industry is still taking shape. Legislative and regulatory policies can have a profound impact on the direction the movement takes. There are many academic sources available, but what differentiates this report from others is that this author is able to combine economic rigor with direct industry experience.  The author has a background in economics, experience in high tech business operations as well as a background in the cannabis industry as a chief operating officer, a governmental affairs officer and a compliance officer. These practical experiences in the cannabis industry has further enabled the author to take the next step and assess the impact policies have on the industry and to make policy recommendations to address them.

Front Runner, an agglomerated cannabis data website, commissioned Whitney Economics to conduct an analysis of the Washington cannabis market. The initial genesis of the project was to ascertain whether or not the 222 additional retail outlets proposed by the Washington Liquor and Cannabis Board were an appropriate number based on the BOTEC analysis.

Once the research commenced, the project extended beyond the initial scope and examined such topics as; the total demand forecast for the market, the total supply available to support the market, the elasticity of demand, taxation and how to maximize the conversion from the black market to the retail market. The data used in this report cites multiple sources, includes original analysis and forecasts, as well as data taken directly from the Washington Liquor Control Board (WLCB) and BioTrackTHC. The empirical data was analyzed and the findings contained herein are an interpretation the impact of policy decisions have on the Washington cannabis market.

The data assesses the empirical results from January 2015 through March 2016 and extrapolates into the 2016 fiscal year and beyond.The methodology was to examine specific aspects of the market to ascertain if the Washington market was able to be sustained at the proposed retail levels, whether the current policies support the development of the market, what policies need to be changed and what indicators to examine moving forward.

The conclusions derived from the data were meant to answer questions about the market that are fundamental to the foundation of economics. For if the data cannot support the most basic fundamentals of economic theory, then the data or policies must be viewed with skepticism.

The findings of this report are simple. The consumer is extremely price sensitive. The black market plays a large role in the marketplace and without a reduction in tax, the market will not realize its true potential. The level of demand is able to support the retail expansion, but without converting the demand over from the black market, the retail system will face challenges in growth. The allocation of the retail outlets can support the demand, but the allocation by county needs adjustment. The supply of product in the market is appropriate for now, however the amount of supply capacity is well in excess of what the market will bear. This, in turn will lead to further commoditization of prices, compression of retail margins and maintain a vibrant black market.

The insights contained in this report are much more applicable to an investor, a policy maker or a regulator than many previous works and that is what differentiates this report from others currently available.The report also provides a list of indicators to track on a regular basis that will allow the investor or regulator to ascertain the health of the industry and the success of the public policies as they currently exist.

DOWNLOAD full white paper

Colorado’s Monthly Marijuana Sales Top $100 million

COLORADO: Marijuana sales blazed past the $100 million mark for the first time in August, the Denver Post reported over the weekend.

According to sales data from Colorado’s Department of Revenue released Friday, sales of recreational pot topped $59.2 million for the month, while medical marijuana dispensaries pulled in $41.4 million, for a combined $100.6 million — the highest monthly total since legal recreational cannabis sales began there in January 2014.

“It means that $100 million is going to licensed, taxpaying businesses, creating jobs and helping to build new schools,” Dan Riffle, director of federal policies for the Marijuana Policy Project, told Yahoo News, “instead of going to cartels and drug dealers — as is the case in the 46 states that don’t regulate marijuana.”

 

Revenue From Colorado Marijuana Tax Expected To Double In 2015

COLORADO: It’s heady times in the Mile High City, and that’s just at the state budget office.

Colorado is on track to more than double the state’s marijuana tax revenues this year, showing up the $44 million collected in 2014 with a projected 2015 windfall of $125 million, reports The Guardian. The state hoped to collect $70 million in 2014, but fell short.

According to financial data released last week, the state also raked in significantly more money taxing marijuana than it did taxing alcohol for the yearlong period of July 2014 to June 2015, with marijuana netting almost $70 million and alcohol just under $42 million.

Recreational Marijuana On 2016 Florida Ballot? Petition Needs 683,000 Signatures

FLORIDA: Regulate Florida, a political committee that wants to amend the Florida constitution to legalize and regulate adult use of marijuana for recreational use, has been given the go-ahead by the Department of State, Division of Elections to work on getting its initiative placed on the 2016 elections ballot.

This means that Florida voters could potentially be voting to legalize medical marijuana and to legalize marijuana for a recreational use for adults.

If voters were to approve it, then it would become legal in the state for those aged 21 or older to purchase and possess up to an ounce of marijuana and grow up to six plants within their own home after being approved for licensing.

Massachusetts Marijuana Groups Seek Pot Legalization Vote

MASSACHUSETTS: Two marijuana advocacy groups on Wednesday are set to submit proposed ballot initiatives that would allow Massachusetts voters to decide whether to legalize recreational pot smoking in the state.

The initiatives could become part of a wave of similar measures put before voters in a half-dozen U.S. states in 2016 as pro-marijuana groups follow a strategy that has already legalized the drug in four states plus the District of Columbia.

The proposals from the Campaign to Regulate Marijuana Like Alcohol and the Bay State Repeal say legalizing the drug in Massachusetts would bow to the reality that marijuana use is widespread in the United States. They say legalization would make it easier to regulate its sale and prevent people under 21 years of age from obtaining it.

How Is Marijuana Legalization Going? The Price Of Pot Peace Looks Like A Bargain.

In 2012 John Larson, a retired high school math and science teacher, voted against I-502, the initiative that legalized marijuana in Washington. Yet this week Larson was one of the first government-licensed marijuana merchants to open a store in that state: Main Street Marijuana in Vancouver. “If people were dumb enough to vote it in, I’m all for it,” he toldThe New York Times. “There’s a demand, and I have a product.”

Colorado Gov. John Hickenlooper also seems to have had a change of heart about marijuana. The former brewer, who opposed Amendment 64, his state’s legalization initiative, is not about to become a budtender. But in a recentinterview with Reuters, Hickenlooper conceded that the consequences of letting people grow, sell, and consume pot without risking arrest have not been as bad as he feared.

“It seems like the people that were smoking before are mainly the people that are smoking now,” Hickenlooper said as Colorado marked six months of legal recreational sales last week. “If that’s the case, what that means is that we’re not going to have more drugged driving, or driving while high. We’re not going to have some of those problems. But we are going to have a system where we’re actually regulating and taxing something, and keeping that money in the state of Colorado…and we’re not supporting a corrupt system of gangsters.”

MJ Research Report: Washington State Rakes In Over $10M In Single Month From Pot Tax

By Joe Armes

WASHINGTON: The legal cannabis industry has been rapidly growing in Washington State since the implementation of recreational sales under I502, and along with them so too have the tax revenues due to the state. Washington’s hefty 25% excise tax, which is applied to each stage of the supply chain (, processors and retailers), has alone resulted in accrued tax obligations of nearly $10.4M due to the state from May.

 

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The excise tax is the largest of several revenue streams legal cannabis is bringing to the state.  Additionally, the state collects tax revenues from retail sales and business and occupation taxes generated from cannabis businesses.  All the while, the market continues to shift toward retailers capturing an increasingly larger portion of the revenues generated by the industry leaving many industry insiders pleading with the state to pass legislation to modify the excise tax structure to a retail tax that maintains the state’s tax revenues and provides relief for producers and processors.

Here are some other insights from the Washington State Recreational Cannabis Business Intelligence Dashboard:

      • Washington set a new record single day sales with $1.88M in Sales on May 29th.
      • The state now has 163 licensed retail stores with 146 recording sales as of May.
      • Combined Producer, processor and retailer sales were $215M through June 1st.
      • Average daily sales for the month of May were $1.31M, up 8.3% from April.

If you are a producer, processor or retailer who would like to be a confidential data provider for the dashboard and receive custom business insights or would like more information about business intelligence and analytics feel free to contact Joe at joe@analyticallycorrect.com.

About Joe Armes: Joe is the founder of Analytically Correct, a data analytics services company that provides custom analytics solutions that transform data into insights to allow decision makers to focus on what adds most value. His passion is to work with organizations with deeply rooted causes to help them gain access to the knowledge needed to make timely and informed decisions.