NEW YORK (MainStreet) — Reports from Washington state are that the recreational marijuana business is having trouble paying its taxes and sales are moving to the black market. The irony is that the taxation and regulation of pot was a selling point in legalization.
One example is that of a James Lathrop, the owner of Cannabis City, the first recreational marijuana retailer to open in Seattle. He is lamenting the fact that he is not making profits because of taxes.
Lathrop told MainStreet that in Washington marijuana products are taxed at “a multiple compound rate.” There is 25% tax on what the grower ships to the processor. Then there is another 25% tax from the processor to the retailer. The retailer, Lathrop and his colleagues, then add another 25% tax which is passed on to the customer.
“Each of these taxes is added to the prior tax,” he said. “Plus another 10% of regular sales tax, city tax, then there is an additional federal tax of another 25%. So on the retailer side alone that is approximately 60% of the product in pure tax, with approximately 30% going to to cost of goods and approximately 1 to 5% left to actually run the business. The growers and processors are in a similar situation.”