Washington Marijuana Business

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What is the Demand for Marijuana in Washington State?

According to a report published by the Washington State Statistical Analysis Center on monitoring impacts of recreational marijuana legalization in 2019, recreational marijuana sales rose dramatically in the first few months of legalization in 2014. The total sales also more than doubled between 2015 and 2016. However, sales, although increasing, have done so at a lower rate since then.

In 2014, total annual sales were estimated at $65 million. In 2015, the estimate was $534, while that figure more than doubled in 2016, reaching an estimated value at $1,109 million. In 2017, recreational marijuana sales were put at $1,244 million.

The WSSAC report also identified that Washington counties close to Idaho, where marijuana remains illegal, typically recorded higher per capita recreational marijuana sales. Retail sales of recreational marijuana sold per 1,000 persons living in Asotin County were estimated at over $200. In Whitman and Spokane Counties, retail per capita sales were estimated at between $150 and $200. In counties located in interior parts of Washington State, such as Douglas, Yakima, Benton, and Lewis, recreational per capita sales of marijuana were estimated at between $50 and $100. Note that this data is only reported for data obtained between July 1, 2018, and June 30, 2019.

The rise in marijuana use among adults in Washington State also lends credence to the belief that demand for the product has increased in recent years. The Washington State Statistical Analysis Center reports that current marijuana use among adults has increased each year for all age categories. The report indicates that the most significant increase in use is among residents between the ages of 18 and 24. From data obtained over a 7-year period ( 2011 - 2017), in 2011, 16% of 18–24 year-olds reported using marijuana in the previous 30 days, while the number rose to 28% in 2017. In 2011, only 1% of the Washington State population aged 65 and older reported using marijuana in the previous 30 days. In 2017, 7% reported using marijuana within the same time frame. That figure though may be slightly offset by the increase in the Washington population of residents now above the age of 65.

How is Marijuana Taxed in Washington State?

Although Washington legalized recreational marijuana in 2012, recreational sales only began in July 2014. I-502 imposed a 25% excise tax on cannabis sales at each of the three tiers in the cannabis supply chain. This meant that from producers to processors, processors to retailers, and retailers to consumers, a 25% tax was applied to each transaction. However, if a business was a dually-licensed producer and processor, the tax would not be imposed between those two licenses. The tax was applied in addition to state and local taxes. In 2015, Chapter 4, Laws of 2015, replaced the three-tiered tax structure with a different tax system.

Per the 2015 legislation, Washington state does not tax cannabis flowers but instead levies a 37% retail excise tax and a 6.5% sales tax on all cannabis product sales. The generated excise taxes are to be deposited into the Dedicated Marijuana Fund for disbursement. The legislation requires the account to make quarterly and annual disbursements. For quarterly disbursements, the following are required:

• Department of Social and Human Services: $125,000. This includes administration, implementation, and analysis of the Healthy Youth Survey.
• Department of Social and Human Services: $50,000. Involves contract for the Washington State Institute of Public Policy to conduct a cost-benefit evaluation report
• University of Washington Alcohol and Drug Abuse Institute: $5,000. This includes the production of web-based materials regarding the health and safety risks associated with marijuana use.
• Washington State Liquor and Cannabis Board: $1,250,000. As required under the administration of I-502.

After quarterly disbursements, additional recipients and priorities include:

• 50% to the Basic Health Plan Trust Account. As per the Health Care Access Act.
• 19.7% to the State General Fund.
• 15% to the Department of Social and Human Services Division of Behavioral Health and Recovery. This involves support for the implementation of programs and practices aimed at the prevention or reduction of substance use.
• 10% to the Department of Health. This involves the creation and implementation of marijuana education and public health programs including a marijuana use public health hotline, a grant program for local community agencies focusing on prevention and reduction programs prioritizing marijuana use by youth, and media-based education campaigns regarding the health risks associated with marijuana.
• 5% to the Washington State Health Care Authority. This includes contracts with community health centers to provide primary health and dental care services as well as migrant and maternity health care services.
• 0.3% to the Office of the Superintendent of Public Instruction. This includes fund grants to the Building Bridges program.

According to the annual report of the Washington State Liquor and Cannabis Board for the Fiscal Year 2019, $116.5 million was sent to the state General Fund to provide much-needed resources for education and other critical state services. $188.3 million was earmarked to fund health care services. $15 million was sent to cities and counties, $9.5 million was earmarked for the distribution of public education materials about the health and safety risks of cannabis, to fund substance-abuse programs, and for the prevention and reduction of cannabis use by youth.

In 2019, $400,000 from the tax revenue generated was set aside to administer the Healthy Youth Survey and contract the Washington State Institute for Public Policy to conduct the cost-benefit evaluation of the implementation of I-502. $49.2 million was used as fund grants to support the Building Bridges program and for the Health Care Authority funding for community health centers.

What is the Washington State Liquor and Cannabis Board?

The Washington State Liquor and Cannabis Board (WSLCB) is the primary adult-use cannabis regulatory authority in Washington State. It regulates the production, processing, selling, and delivery of recreational marijuana in the state. Initiative 502 authorizes the WSLCB to receive tax on cannabis production and sales and set new limits on blood tetrahydrocannabinol (THC) levels for driving under the influence.

The WSLCB in 2013 released the formalized rules for the recreational marijuana industry, derived from a combination of bills passed to expand the products for consumption and possession. When the licensing window opened not long after, licenses were issued to qualified persons at the beginning of 2014.

The WSLCB is overseen by a 3-member board appointed by the Governor to 6-year terms. The Board holds regular public meetings and work sessions with stakeholders, makes policy and budget decisions, and adjudicates contested license applications and enforcement actions on licensees. The members of the Board are also tasked with hiring the agency's Director, who manages day-to-day operations.

The WSLCB also comprises the Licensing and Regulation Division, Communications Divisions, Enforcement and Education Divisions, and Human Resources Division. The Enforcement and Education Division enforces state liquor, tobacco, vapor products, and cannabis laws and regulations to promote public safety. Officers also provide education to licensees, communities, and local law enforcement agencies.

The Licensing and Regulation Division administers all licenses and permits for the sale, service, manufacturing, and distribution of alcohol and cannabis within the state of Washington. With over 80 employees, the Licensing and Regulations Division is the second largest LCB division. It comprises the Customer Service, Liquor, Licensing, Cannabis Licensing, Adjudications, and Policy and Education units.

The WSLCB is located at:

Union Tower Building

1025 Union Avenue SE

Olympia, WA 98504

Phone: (360) 664-1600

You can also reach the agency via email directly from the WSLCB website.