HIGH RETURNS
Marijuana sales and tax revenue soar in Washington state, one year after legalization
BELLINGHAM, Wash. — A year ago today, Zack Henifin packed more than 10 pounds of marijuana — about $28,000 worth — into a pickup truck and drove in the small hours of the morning from Bremerton to Whatcom County, a state trooper following him as he headed into his place of business.
When the cop, off-duty at the time and there for Henifin’s security, and Henifin, manager of Top Shelf Cannabis in Bellingham, arrived at their destination around 3 a.m., customers were already lined up outside the store.
“That was a crazy trip,” said Henifin this week, thinking back to last year. It was, he said, “a new frontier.” That morning at 8:03 a.m., when Top Shelf sold two grams of OG Pearl Kush to Cale Holdsworth of Abilene, Kan., in front of a huge crowd, it was widely reported as Washington’s first legal recreational weed sale.
A year later, it was a different scene at Top Shelf on a quiet Tuesday morning as Scott Azevedo, a U.S. Navy veteran, and a friend purchased something called “Cherry Pie.”
“I used to have one of those medical cards, but you don’t even need that any more,” Azevedo said.
At the end of Washington’s first year of legal recreational weed sales, proponents of legalization and officials say it’s been a success, pointing to steadily climbing sales figures and tax revenue that far exceeded the state’s original forecast. But the new legal retail and wholesale business hasn’t been without growing pains and some opponents of legalization say it’s too early to know the public health toll.
Meanwhile, officials in other jurisdictions, including B.C., are looking at the example of Washington and Colorado as they set a course in a potentially massive growth industry.
The Washington state government predicted in February 2014 that the first year of legal sales would bring in $36 million in new taxes, according to the Washington Liquor Control Board, which this month will become the Liquor and Cannabis Board.
But Washington nearly doubled that projection, generating $65 million in tax revenues in the first 12 months of sales.
In July 2014, the first month of legal retail bud in Washington recorded a total sales volume of $3.3 million. The industry has expanded in each of the following 11 months, with sales figures for the month of June 2015 hitting $43.4 million in Washington, averaging $1.5 million in sales a day.
In November of 2012, citizens of Washington and Colorado states voted to legalize marijuana use and possession for adults 21 and over, but it wasn’t until last summer that Washington had implemented a legal sales system.
And even then, not everything was fully ready to go, says Pete Holmes, Seattle’s city attorney.
Holmes believes the first year has been a success, but he said getting the supply chain in place “took longer than anyone fully expected.”
“The demand was predictably high — no pun intended,” said Holmes, but there was initially “a wholly inadequate legal supply.”
The situation saw average prices rise to a high of $25.12 per gram in licensed shops last August, but the average price has since dropped to less than half that.
The high prices and long lines at legal stores meant many customers simply kept shopping for marijuana on the black market, while a “grey market” of so-called medical marijuana shops that sprouted across Washington after the legalization vote in 2012 kept operating outside the state-licensed recreational pot system.
“That’s the biggest problem,” said Holmes. “Opportunists were just handed a market and an opportunity to make a lot of money with an unregulated, unlicensed, untaxed product.”
But now, Holmes said, the window for those illicit opportunists “is closing rapidly.”
He referred to new laws coming into effect this month, implementing a new tax structure to apply to both medical and recreational pot shops.
The new laws are being welcomed by those in the licensed weed trade, such as Henifin at Bellingham’s Top Shelf, as they are expected to ease the heavy tax burden and to level the playing field with the previously unlicensed medicinal shops.
Brian Smith, spokesman for the Washington Liquor Control Board, said: “You have a legitimate industry that plays by the rules and they’re upset because they’re competing with the guy across the street that’s not following the rules and he’s not part of any system.”
With $259 million in sales in the first year of legal retail pot in Washington, no one is sure how much of the state’s marijuana market that total captures.
Holmes estimates it represents around 50 per cent of all pot sales, but Smith thinks it’s closer to 10 or 12 per cent.
Both expect the legal pot industry will continue to grow in Year 2 and to make further inroads into the black market.
“That’s capitalism,” said Smith.