Wednesday marks the dawn of a new era in the Northwest recreational marijuana market. While possession becomes legal in Oregon for adults 21 and older that day, a bill ushering in a number of sweeping changes to Washington’s recreational marijuana system also will become law.
Gov. Jay Inslee is expected to sign the measure, House Bill 2136, this afternoon, Inslee spokesman David Postman said. Whether Inslee will strike any parts of the bill isn’t clear.
“We don’t give advance word on vetoes,” Postman said in an email to The Columbian, “but I can tell you the administration supported that bill.”
The bill’s key feature is a revamped tax structure that will take effect Wednesday. Few seem to see the bill as a panacea for pot businesses struggling to make money, but many legislators and business owners in the industry say they hope it will relieve the pressure on growers and lead to a price drop at stores.
After the bill passed the state House on Friday afternoon, Sen. Ann Rivers, R-La Center, said it represented great progress for the industry, but it wasn’t perfect. The 59-38 vote split was an indication that lawmakers still have plenty of kinks to work out in Washington’s recreational marijuana system, Rivers said.
Since the system’s launch last year, the industry has operated under a structure that charges a 25 percent excise tax three times along the supply chain from grower to consumer. The bill scraps that tax for growers and processors while replacing it with a single 37 percent tax charged at the point of sale.
It’s a welcome change for growers such as Brian Stroh, who owns Vancouver-based CannaMan Farms.
“I can acquire additional product now,” he said.
Stroh said he estimates that only about 10 percent of growers have been able to make a profit under the current tax system. About three-quarters of Washington’s marijuana growers also hold processor licenses, leaving them to pay a compounded excise tax rate on their products.
With the new structure, most growers and processors will need to lower their prices to ease the burden on pot shop owners, Stroh said. The upshot is that doing so will help growers sell more product to stores, which could eventually buoy the struggling production side of the industry.
“The vast majority of these businesses are really small,” Stroh said. “For those who can hang on through this period of time, there might be better times ahead.”
But it’s ultimately still up to the store owners to decide whether to lower prices, and Stroh suspects not all of them will.
“Some are saying, ‘I’m not passing on a cent, because I’m not making money,’ ” he said. “That’s just free market. That’s the way it is.”
Gareth Kautz, one of the owners of Vancouver’s High End Market Place, is confident the change will catalyze a price drop at his store in Uptown Village.
“It should end up driving the prices down in the long run to a more reasonable level, especially on things like concentrates,” Kautz said. “The outlook on it is kind of muddled, but the truth is it’ll lower our prices about 25 percent.”
That could be essential to the survival of Clark County’s pot shops, which will eventually compete with Oregon stores charging a lower point-of-sale tax. Stores on each side of the river will carry different products, but prices are expected to be lower in Oregon.
For now, the picture for Clark County’s shops is bright, though, as Kautz and other store owners expect July will bring their biggest sales figures yet. The first of the month tends to be a big day for sales, and this time stores are heading into the Fourth of July weekend with thousands of customers from Portland ready to celebrate the new milestone of legal possession.
The Oregon market will eventually take a bite out of the cash flow at Clark County pot shops, but stores on the south side of the Columbia River aren’t expected to open until the fall of 2016. And Vancouver’s pot shop owners welcome the competition from Oregon, Kautz said.
“We’re definitely embracing it,” he said.
Consumers from Portland already make up a large portion of the customer base at Vancouver’s six pot shops. Although it’s still illegal to transport marijuana across state lines, Portland Police spokesman Sgt. Pete Simpson recently announced that police won’t arrest Oregonians simply for bringing it back home from Washington.
