Marijuana faces sales tax in Oregon — but there may be a period of tax-free … – OregonLive.com
SALEM–A key legislative committee on Tuesday approved a bill that would establish a sales tax on recreational marijuana sales — but that could also give bargain shoppers some tax-free pot buying opportunities in the coming months.
The legislation calls for a sales tax of up to 20 percent once state-licensed recreational marijuana retailers open shop sometime in the latter half of 2016.
In the meantime, House Bill 2041, calls for the Legislature to have a stiffer tax of 25 percent if lawmakers decide to go ahead with a temporary program to allow medical marijuana dispensaries to sell to recreational consumers.
But as they say in the late-night infomercials, wait, there’s more. If that early sales program happens — and it’s by no means a certainty — the pot won’t be taxed until Jan. 4.
Why tax-free shopping until then? It actually has more to do with legislative politics and the tax bureaucracy than with a desire to provide a pre-holiday shopping deal for recreational marijuana consumers.
“The idea of getting the legal access [to marijuana] sooner is more important than getting tax revenues sooner,” said Rep. Ann Lininger, D-Lake Oswego and co-chair of the House-Senate committee implementing the marijuana legalization law.
Possession of recreational marijuana will become legal on Wednesday, July 1, but consumers won’t have anywhere legal to buy it in Oregon unless they have a medical marijuana card.
Several members on the committee are seeking to start a temporary sales program that would allow recreational consumers to buy dried marijuana — and perhaps a few other products — at medical marijuana dispensaries starting sometime in the next several months. They say they want to give people an alternative to the black market.
It’s unclear if the Legislature as a whole would go along with an early sales program, and Gov. Kate Brown has also not weighed in on the issue. “The governor’s office is monitoring the deliberations to ensure public safety and enforcement considerations are addressed, but hasn’t taken a formal position yet,” Brown spokeswoman Kristen Grainger said in a statement Monday.
If early sales start, Lininger said legislators wanted to give the Department of Revenue time to set up a system for collecting the tax — no small matter in a state with no general sales tax.
In addition, the Measure 91 marijuana legalization initiative doesn’t call for any taxes to be levied until after Jan. 4.
If legislators amended Measure 91 to begin collecting taxes earlier than that, it would be regarded as a tax increase requiring a three-fifths vote of both houses, said Mark Mayer, a deputy legislative counsel.
Dispensary owners, who complain that too many of them are competing for too few medical marijuana patients, are pushing hard for the temporary sales program.
Beau Whitney, an owner of a dispensary in Northeast Portland, said he doesn’t think the temporary lack of a tax — and a 25 percent bump after Jan. 4 when taxes begin — would have that much impact.
He said the lack of a tax gives dispensary owners a chance to ease into the market, and he said that even with the additional tax, he projects prices to be lower than in neighboring Washington state. Taxes there nearly double the price of the product, according to Mazen Malik of the legislative revenue office.
“There will be a surge in demand for [marijuana] flower and it will be very beneficial for dispensaries,” Whitney said.
Whether the Legislature and governor agree to early recreational sales at dispensaries or not, HB 2041 would establish what appears to be the largest sales tax in Oregon history.
The state has been famously averse to sales taxes, on nine occasions rejecting ballot measures to implement one on a broad range of products.
But legislators decided to move what they all like to call a “point of sale” tax after concluding that the tax provisions in Measure 91 aren’t as workable. The initiative called for a $35-an-ounce harvest tax on the most potent parts of marijuana and lesser taxes on other parts of the plant.
A sales tax is easier for producers and the state to administer and it also eases the task of making sure that medical marijuana remains tax-free.
The fact that the committee unanimously approved the sales tax proposal, said Lininger, shows how legislators can work together “when you really change the context, like we did by legalizing marijuana.”
HB 2041 calls for a 17 percent state tax on marijuana sales at OLCC-licensed retailers. In addition, localities would be allowed to add another 3 percent.
The Legislative Revenue Office estimates that this tax would generate about $30 million a year once it is fully phased in.
The committee on Tuesday also passed another measure, Senate Bill 844, that would set up a research program to study the medical benefits of marijuana.
In addition, it would allow providers caring for people with a “debilitating medical condition” to provide them with the drug if they are a medical marijuana patient.
In addition, hospitals could not deny patients transplants solely because they use medical marijuana.