Seattle Dispensaries Price per Pound?

PurpleBuz

Well-Known Member
People, get out your calculator on the tax issue.

Say you are a producer/processor, so only two levels of the 25% excise tax apply.
1. you are mixing up sale price and sale price plus taxes. Divide 4.88 by the actual sale price. ie 4.88/10.66.
2. You also need to add on retail sales tax and BO taxes.
3. Your cherry picking the best case for the least taxes.

The 85% is an "estimate" to include cases where there are both 1 and multiple B2B transactions before the final retail sale.
The part that is really bad is that a B2B transaction ... essentially a wholesale tax is absurdly high. No where in any industry does any govt entity charge a 25% wholesale tax, because it stifles business.
 

deebickle

Member
Yeah, I hear you. I thought it worked that way too at first, but it doesn't. This is an excise tax, which is generally included in the price (like gasoline). They are taking 25% of whatever you sell for. So the grower (and retailer has to bump up their prices to account for it.

From the WAC: "must pay to the board a marijuana excise tax of twenty-five percent of the selling price".

From the BOTEC white paper 1: We have found the average producer is grossing around $500,000 annually .....(page 3),and "The excise tax for the average sized producer is expected to be $125,000 per year (25% of $500,000)." page 4.

There's no question it is high, but the only time you'll have three levels at 25% is when you have value added products like infused soda pop or whatever, and they can probably absorb the tax. The tax system will definitely discourage too much B2B transactions, because it would be overpriced quickly. But if it is too high to allow the system to work they will drop the rate. Remember the LCB didn't come up with this tax rate, it was locked in by I-502. So after time they can recommend the Legislature change the law to allow lower rates.

And yes, like I said, you have to add in the local sales tax, which is almost 10% for me.

Yes, that is the lowest, but I'm not really trying to cherry pick. By my method, if you add in the third round of 25% (assuming a doubling of the price at each level) the total excise tax rate is $14.34/37.88 = 38%. For hard liquor, the state tax is 20.5% plus $3.77/liter.
 

PurpleBuz

Well-Known Member
Yeah, I hear you. I thought it worked that way too at first, but it doesn't. This is an excise tax, which is generally included in the price (like gasoline). They are taking 25% of whatever you sell for. So the grower (and retailer has to bump up their prices to account for it.

From the WAC: "must pay to the board a marijuana excise tax of twenty-five percent of the selling price".

From the BOTEC white paper 1: We have found the average producer is grossing around $500,000 annually .....(page 3),and "The excise tax for the average sized producer is expected to be $125,000 per year (25% of $500,000)." page 4.

There's no question it is high, but the only time you'll have three levels at 25% is when you have value added products like infused soda pop or whatever, and they can probably absorb the tax. The tax system will definitely discourage too much B2B transactions, because it would be overpriced quickly. But if it is too high to allow the system to work they will drop the rate. Remember the LCB didn't come up with this tax rate, it was locked in by I-502. So after time they can recommend the Legislature change the law to allow lower rates.

And yes, like I said, you have to add in the local sales tax, which is almost 10% for me.

Yes, that is the lowest, but I'm not really trying to cherry pick. By my method, if you add in the third round of 25% (assuming a doubling of the price at each level) the total excise tax rate is $14.34/37.88 = 38%. For hard liquor, the state tax is 20.5% plus $3.77/liter.
sorry thats bull shit for a percent calculation. You are calculating percent on the final total not on the base thats being taxed. it does not matter how the state defines what the amount of the tax is to be. This is just a basic percentage of the Sale price.
 

deebickle

Member
Ohh, I think I get what you're saying. Yeah, that makes it lower if you divide by the base price. So lets do it your way. For only two rounds of the 25% tax it would be $4.88/$9.33 = 52%. For all three levels of taxing divide $14.34 excise tax by $23.54 pre-tax price = 61%. Somewhere in between our original numbers.

You're right that most people look at a tax rate in that way. It's just that excise taxes are counted the other way, they take a slice of the action, not an added cost to the transaction. If you convert the 25% excise to the way you are calculating it is really a 33% rate. Sell $100, state takes $25, you get $75. An effective tax rate of 33% if based on what you get.

Anyway you look at it it's the same amount of cash being collected, and I think you are right in that it could sink the ship to have such a high tax rate. I'll bet they lower it after one year or so, just to make the system work.
 

colonuggs

Well-Known Member
The Feds are gunna have a field day when tax time comes.....Hopefully the Feds will change their policies/laws

Can you say audit every marijuana related (grower processor retailer) business in Washington :) :finger: According to the Feds you aren't allowed 1 tax deduction of any kind


$1600-2000 LBS at the market
 

flat9

Active Member
Well that has been the case for quite some time already and I don't think dispensaries have been unduly audited...
 

colonuggs

Well-Known Member
Well that has been the case for quite some time already and I don't think dispensaries have been unduly audited...
Harborside Health Center, Oakland Pot Shop, Hit With $2.4 Million Tax Bill


In this Feb. 1, 2011 file photo, employee Gerard Barber stands behind medical marijuana clone plants at Harborside Health Center in Oakland, Calif. The Oakland medical marijuana dispensary that bills itself as the world's largest is scheduled to announce the results of a year-long Internal Revenue Service audit. The center, which is on pace to do $28 million in sales this year, is defending its practice of deducting millions in business expenses such as salaries and overhead.





SAN FRANCISCO -- The federal government has found a new weapon in its war on marijuana – the tax man.

A San Francisco Bay area medical marijuana dispensary that promotes itself as the world's largest has been hit with a $2.4 million tax bill following an audit by the Internal Revenue Service, the dispensary founder said Tuesday.


The back taxes, penalties and interest levied against Harborside Health Center came after the IRS examined its returns for 2007 and 2008 and determined a 1982 tax code prohibiting cost deductions for businesses that traffic in illegal drugs applies to the dispensary.




Harborside is a spa-like fixture on Oakland's waterfront with 94,114 registered customers and 84 full-time employees that offers an average of 30 varieties of medical marijuana every day and has $22 million in annual sales.


"What kind of drug trafficking organization actually files a tax return? None of them do," said Harborside CEO Steve DeAngelo, who gave his auditor a personal tour of his posh apothecary. "The very fact that we filed a tax return and told the IRS all the details of what we are doing proves we are not a drug trafficking organization."


The IRS said the agency does not comment on individual audits.


DeAngelo, the subject of an upcoming Discovery Channel reality show, said the write-offs disallowed by the IRS included standard operating costs such as rent, payroll, employee health insurance and licensing fees.


Government auditors did not dispute, however, that Harborside had properly deducted its biggest expense – the millions of dollars it spent buying pot to sell to people who use it under California's medical marijuana law.


San Francisco tax attorney Henry Wykowski, who represents DeAngelo, said a 2007 case involving another California dispensary established that the cost of goods sold was a legitimate expense for businesses the IRS otherwise considers illegitimate.



"It goes all the way back to Prohibition," Wykowski explained. "They expect even businesses operating illegally to file tax returns, so they still have to give them their business deductions, and a cost of goods sold is the primary deduction that any business would have."

DeAngelo has until Dec. 22 to contest the audit in tax court. The IRS has told him it is now reviewing Harborside's returns for 2009 and 2010.


Meanwhile, a handful of state officials have written House Speaker John Boehner, a Republican, and Senate Majority Leader Harry Reid, a Democrat, on behalf of DeAngelo, asking the two lawmakers to exempt "legally operating cannabis businesses" from the tax code section for drug traffickers.


DeAngelo said he does not have the $2.4 million the IRS wants. Like all legal medical marijuana dispensaries in California, Harborside operates as a nonprofit corporation while paying state sales taxes and a 5 percent local tax to Oakland – for a total of $3.1 million this year, he said.


"We would be happy to pay taxes like every other business does," he said. "No business, including Harborside, could survive if it's taxed on its gross revenue. All we want is to be treated like every other business in America."


Wykowski said he represents at least two dozen other California and Colorado pot dispensaries dealing with IRS audits. Some have persuaded auditors to accept deductions for auxiliary services such as on-site yoga classes, the time employees spend counseling customers as opposed to preparing marijuana, and quality testing. Others such as

Harborside have been less successful.


"What the taxing authorities are losing sight of is if you tax these places out of business and make it so they can't compete, all it is going to do is boost underground sales," he said. "The guys on the street aren't paying their employees and if they are, they certainly aren't withholding taxes."
 

farmer phill

New Member
At that low of a price 1800 their is not much time put in on the crop that is just low ball bullshit outdoor/commercial herb prices! Organic well taken care of plants that are perfectly trimmed the donation exchange is between 2200-and 3000 if you got top of the line, organically grown herbs never sprayed with pesticides.. Farmers are unilaterally ambiguously in charge of price fluctuations they are on the rise so upload now EVERYONE
 

flat9

Active Member
Key word: "unduly." if you're not claiming stuff on your taxes, expect an audit. Regardless of the source of the income.
 

flat9

Active Member
At that low of a price 1800 their is not much time put in on the crop that is just low ball bullshit outdoor/commercial herb prices! Organic well taken care of plants that are perfectly trimmed the donation exchange is between 2200-and 3000 if you got top of the line, organically grown herbs never sprayed with pesticides.. Farmers are unilaterally ambiguously in charge of price fluctuations they are on the rise so upload now EVERYONE
Why does organic nutrients matter? To be honest I cannot taste the difference between organic and chemical ferts if everything is flushed properly...
 

colonuggs

Well-Known Member
Key word: "unduly." if you're not claiming stuff on your taxes, expect an audit. Regardless of the source of the income.
The back taxes, penalties and interest levied against Harborside Health Center came after the IRS examined its returns for 2007 and 2008 and determined a 1982 tax code prohibiting cost deductions for businesses that traffic in illegal drugs applies to the dispensary.

The write-offs disallowed by the IRS included standard operating costs such as electric, rent, payroll, employee health insurance and licensing fees.

The standard business tax deductions/write-offs that all businesses can take, are not allowed by any marijuana businesses until the FEDS change mj's classification

Imagine starting a retail marijuana store or grow commercially and not being allowed to deduct your licensing fees or Rent electric insurance payroll
 

deebickle

Member
So we've got:

1 - High taxation rate
2 - IRS problems with taking deductions
3 - Being vulnerable to all government agencies by declaring youself
4 - Supply and demand pushing prices down
5 - Dependent on whims of state LCB inspectors, who can destroy crop as punishment fro some infractions
6 - Have to comply with myriad of regulations, from 24 hour cameras to labeling details

What else am I missing?
 

flat9

Active Member
I think the solution may be to just go back to doing things under the table from the sounds of it. Anyone going to Olympia today re: draft rules?
 

colonuggs

Well-Known Member
And who the hell voted yes for I-502???? All those people saying I-502 wont effect MJ patients....hahahaha


From what I've seen, soon the dispensaries will be gone and so will home grows ....this will ensure dependency on taxed, state regulated, retail outlets in the states mindset.....Makes going after home growers a priority again ...$$$$$ Bust illegal non licensed grows in the homes....must eliminate the competition/black market supply

Yes, the Liquor Control Board lost its monopoly it has had on liquor in Washington since prohibitions end....now it has a new cash cow :finger:


The first volley is now over the net! On October 21st, a work group composed of staff from three state agencies – the Department of Health, the Department of Revenue, and the Liquor Control Board – issued their draft recommendations for regulating medical marijuana. If you have reviewed the rules recently adopted for recreational marijuana, you’ll see some similarities. The recommendations, when completed, will go to the legislature at the start of 2014.Here are the main points:

  1. Medical marijuana collective gardens and dispensaries (not actually authorized under current law) would be eliminated. Essentially, medical marijuana sales would be folded into the recreational marijuana system. Licensed retail marijuana stores with a state license endorsement could sell medical marijuana to authorized medical marijuana patients. Home-growing would not be permitted for medical marijuana patients.
  2. A medical marijuana registry would be set up and maintained by the state. A far more rigorous health care professional process would be established to authorize a medical marijuana patient, and there would be required medical follow-up. Medical marijuana authorizations would expire after one year and would then need to be renewed.
  3. Sales to medical marijuana patients would be exempt from the state/local retail sales and use tax. The excise taxes would be the same as for recreational marijuana. In essence, medical marijuana patients would get a break on the taxes.
  4. Labeling of medical marijuana would include the levels of THC and cannabinoids. Some strains of marijuana grown specifically for their medical benefits have very little THC in them.
  5. If a medical marijuana patient is under the age of 18, the child’s parent or guardian would need to consent, and the child could not have more than one dose in their possession.
This is still early in the process. These recommendations are going to get talked about a lot, and vetted by the legislature. There will be lots of objections by the existing medical marijuana growers and sellers – they have built up their businesses (and profits) by squirming between the cracks in the law, running unregulated and untaxed businesses for quite some time. All those who wish to submit comments to the work group preparing these recommendations ([email protected]) must do so before November 18th
I certainly hope that Washington State doesn't become the model for other states to follow

What the hell is a LCB doing regulating marijuana??? We need a Marijuana Control Board :) I will help run it :)

If you are a MJ patient with a valid MJ card, head over to the market......cheap pounds :)

STARTING SUNDAY, NOVEMBER 10, 2013
they will be hosting a market every Sunday during the month of November & December 11am - 5pm .....

next market 11-17-13

The Luxe Lounge
5220 Roosevelt Way
Seattle, Washington




 
Some if the dispensaries choose consignment because they don't carry that much cash on hand.. I've been low balled by one dispensary in kelso, wa for 115 a oz. No thx.. 150 an oz is usually what they'll spend on med. again season and the choice of strains have a lot to do with it
 

Effendi

New Member
Why does organic nutrients matter? To be honest I cannot taste the difference between organic and chemical ferts if everything is flushed properly...
Exactly!! It absolutely doesn't mean shit. "Organic" is a term that make people feel better about themselves.

And I get $3k/lb from 5 different dispensaries I supply in Washington....and that's if I have any material available.

It's requested (at $3K) before it's even done. But then again I've built long term relationships with these guys and I don't haggle, front or consign in anyway.

They demand cash ...er excuse me "Donations" on the spot when they offer so same rules apply for me. Cash on the barrel.

Has never been an issue for me personally, but yes I have heard of low baller co-ops with insecure unsure growers.

I'd give them Greenhouse for $16 cause it's mids, "nothing that starts with a 2" for my top shelf.

.:bigjoint:
 

colonuggs

Well-Known Member
$3000 a pound :)

if your lucky your getting 700 a Q...

almost all the stores are payin $600 a Q for topshelf.... Pre98 bubba, ECSD, WiFi, Exo Cheese and when they do buy a pound they want a break

Shit at the MMJ markets dispensary owners buy pounds for $1200-2000

If you can get 3k a LB @ 5 different stores pm me....cause I have the bomb :)
 

Effendi

New Member
I hear you CN, lots of folks have "the bomb".

Something is only worth what someone else will pay for it.

I have always got $4K/lb for the very same material up until the last two years.

All of a sudden over the last couple of years my material has lost 25% of it's value.

I have had a number of dispensaries offer $7/Q but that just doesn't happen.

It's not that my material is so much better than anyone else, (Every grower is convinced of that)

It's a matter of building long term relationships with buyers who have experienced consistent quality and whose patients wait for specific strains from specific growers.

I know a few other top connoisseur growers who accept as low as $7/Q but if you allow it to go at that rate, it means you are not confident in your level of quality.

It also has everything to do with strain selection. I am cutting out a couple of 20%'s that I personally love but that move slower.

Hard choice to make but if what they want and will pay $3K for is Pie, GSC, Rainbow and Cough, then that's what I'll grow.

Things are about to change once again however up here in Wa, so it is very likely I'll have a different answer in 6 months.

Best of luck to others who make their way through this career.

.:hump:
 
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