Week in Review: Colorado’s flat marijuana sales, Nevada’s new MJ opportunities & Alaska’s cannabis tax ideas

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Monthly cannabis sales in Colorado are flat for the first time since the state launched adult use, Nevada offers a select group additional opportunities in its recreational market, and Alaska weighs the idea of a new excise tax tier for marijuana cultivators.

Here’s a closer look at some notable developments in the cannabis industry over the past week.

Don’t panic

Total marijuana sales in Colorado were flat in April on a year-over-year basis for the first time since the state launched its recreational market in 2014. But one industry executive said he doesn’t consider it a harbinger of a waning market.

Dan Anglin, chair of the Colorado Cannabis Chamber of Commerce, characterized the state’s cannabis sales as strong and said new products and good branding will perpetuate that strength.

“I don’t see this as an issue as we had a dry end of the ski season, which could contribute to flat sales in the mountains,” Anglin wrote in an email to Marijuana Business Daily.

“Also these ‘trends’ don’t really have enough data behind them other than reported sales to tell us anything.”

Statistics compiled by the Colorado Department of Revenue showed that April 2018 sales of medical and recreational cannabis totaled $124.31 million, which is nearly identical to the $124.27 million of sales in April 2017.

An increase in rec MJ sales wasn’t enough to outstrip the decline in medical marijuana sales.

According to the Marijuana Business Factbook 2018, Colorado also may be experiencing fewer out-of-state buyers now that Nevada and California are gaining momentum with their fledgling adult-use markets.

“There’s no doubt that more states coming online for rec sales will have an impact on Colorado,” acknowledged Anglin, who owns Colorado edibles maker Americanna.

But, he added, “there’s no reason to try to read the tea leaves for some kind of indication of a sales slump.”

Patience, patience

Nevada is opening up additional licensing opportunities in its young recreational market. However, the opportunity is limited to a select few, for now.

At least for the next several months, the chance to secure a recreational permit is open only to businesses that already have permanent or provisional medical marijuana licenses.

But Scot Rutledge of Argentum Partners, a Nevada government affairs and marketing firm, noted that entrepreneurs who don’t belong to those two categories have other ways to enter the market:

  • Seek to acquire a stake or partnership interest in an existing marijuana business.
  • Buy an existing recreational MJ license on the secondary market.

He said he has directed investors toward or assisted clients with such transactions. Rutledge, who helped run the campaign to legalize adult-use marijuana in Nevada, warned the latter option of purchasing an existing license could exact a steep price.

“If you’re buying an interest, that’s one thing,” he said. “If you want to buy assets outright, you’re not going to get there for less than seven figures.

“Then you have to get through a lengthy regulatory process (including background checks). You have to be patient and don’t expect an immediate return.”

But there could be rewards down the road, if the market continues to go strong.

In March, the most recent figures available, Nevada’s medical and recreational marijuana sales totaled $49.6 million, up nearly 25% from $39.9 million in July 2017, when the early start program launched.

The statutory period of exclusivity for MMJ businesses ends Nov. 16, meaning that any business – marijuana or otherwise – is eligible to apply for any license type, according to Stephanie Klapstein, public information officer for the Nevada Department of Taxation.

But that doesn’t mean the state will issue additional adult-use licenses at that time.

“We’ll assess where we’re at with licensing as that date approaches,” Klapstein wrote in an email to Marijuana Business Daily.

Alaska tax compromise?

There was no resolution this week for Alaska’s cannabis cultivators, who say the state’s hefty excise tax is destroying profits and boosting black-market activity.

The best way forward may be a compromise that redistributes the tax burden.

Alaska’s Marijuana Control Board and the Department of Revenue kicked around tax ideas Wednesday but didn’t create a formal proposal. They discussed:

  • An amendment to the current excise tax that would create a new tax tier tied to other parts of cannabis plants.
  • A cannabis retail sales tariff that would shift some of the tax burden away from cultivators.
  • A THC potency tariff that would tax product based on its THC content.

The state’s tax division will work with the control board to move a proposal to the Legislature, said the division’s director, Ken Alper, who’d like industry consensus before moving forward.

At least one of the proposals looks dead on arrival, however.

The THC potency tax seems the least viable way forward, said Cary Carrigan, executive director of the Alaska Marijuana Industry Association – particularly in light of a report that casts doubt on the accuracy of the state’s cannabis testing labs.

Carrigan predicts there’ll be a hybrid solution: an amendment to the current excise tax and a retail sales tariff.

Now, Carrigan said, cultivators are paying the “lion’s share” of taxes, and an ideal solution would fairly distribute taxes among retailers, manufacturers and cultivators.

“It’s like a divorce,” Carrigan said. “Everybody’s got to be unhappy before everything is fair. I think we’re going to get there, but it’s going to take time.”

Jeff Smith can be reached at jeffs@mjbizdaily.com.

Joey Peña can be reached at joeyp@mjbizdaily.com