Oregon has taken another big step in its staged introduction of a legal recreational marijuana market - one that may not entirely please consumers leery of new taxes.
Customers at medicinal cannabis dispensaries had to start paying up Jan. 4 - for recreational sales only, though. Oregon is one of five states that do not have a general sales tax, but the Beaver State now taxes recreational marijuana.
Oregon legalized recreational cannabis use in November 2014. But the state has taken a slow and thorough approach to developing a regulatory framework for the new industry. To prevent the black market from thriving while the new rules for recreational retail outlets were worked out, legislators allowed medical dispensaries to sell cannabis for recreational use - tax-free - beginning Oct. 1, 2015.
Now, non-medical customers will pay a temporary 25 percent sales tax. Once the retail stores open - as early as Fall 2016 - the tax will drop to 17 percent, with counties and cities having the option to add another three percent tax on top of that. The additional tax would be decided by local voters.
The tax money will support social service initiatives
So there may be some long faces at the registers today. But disappointed shoppers should keep in mind that the extra expense will improve a number of services statewide. Here's a breakdown of where the tax revenues will go:
- 40 percent to Common School Fund
- 20 percent to Mental Health Alcoholism and Drug Services
- 15 percent to State Police
- 10 percent to cities for enforcing cannabis laws and regulations
- 10 percent to counties for enforcing cannabis laws and regulations
- 5 percent to Oregon Health Authority to fund alcohol and drug abuse prevention programs
So the tax is an important step toward keeping the state (and its marijuana industry) safe, socially responsible and well-regulated. (And the current rate is a lot less than the 37 percent tax charged nearby in Washington state.)
The state's Legislative Revenue Office anticipates raising approximately $4-million in tax revenues between now and 2017; that number is expected to jump to around $60-million from 2017-2019. The boost will mainly come from clearing debts. The bulk of the tax money will initially go to paying off a loan taken out by the Oregon Liquor Control Commission to finance the creation of the Recreational Marijuana Program. Once that's paid off, more money will be available.
Meanwhile, another regulation also takes effect today: aspiring cannabis retailers can begin applying for licenses for outlets that should be allowed to open by the fall of this year.