Monday, November 17, 2014

What's Happening Next Door?

With passage of marijuana legalization initiatives in our neighboring states of Oregon and Alaska, current marijuana businesses owners in Washington are beginning to dream big. It’s worth asking the question: Can a Washington business expand to Oregon or Alaska?

At present, the answer is…Probably. 

Neither Oregon’s Measure 91 nor Alaska’s Ballot Measure 2 requires residency to run a marijuana business.   However, as in Washington and Colorado, the state liquor agencies will be tasked with licensing and regulating marijuana production and sales.  It is possible that the Oregon Liquor Control Commission (OLCC) or the Alaska Alcoholic Beverage Control Board (ABC Board) could enact different rules than we’d expect, based on the wording of the measures voted into law during the general election.   

It will become legal to possess & cultivate limited quantities of marijuana in Alaska on February 26, 2015 (estimating 90 days from certification of election results); and in Oregon on July 1, 2015.  Alaska’s ABC Board has until November 28, 2015 to adopt regulations, including an application timeline. The OLCC is required to begin accepting applications no later than January 4, 2016.

The conversation about taxation in Washington vs. Colorado seems to have had a beneficial effect on plans in Oregon and Alaska.  Although both plan additional excise taxes, the overall taxation rate will be considerably less than that in Washington.  Alaskan producers will pay a flat $50/ounce excise tax on product sold to producers or retailers, and Oregon’s producers will pay a tiered excise tax of $35/ounce for flower, $10/ounce for leaf, and $5 for each immature plant. Since Oregon already doesn't charge a state sales tax, this means that businesses within driving distance of Oregon will likely be disadvantaged if they don’t expand to the new market.

Next, as long as marijuana continues to be federally illegal, there are stiff penalties for transporting product across state lines.  The federal restrictions also apply to paraphernalia, which by definition includes processing equipment.  Transport to Alaska would face the same interstate transportation issues, while also having the additional risk of crossing international borders. 

Nevertheless, opportunities beckon. Having learned through trial-and-error with the process in Washington, our state’s business owners are in a great position to leverage their knowledge and expertise in these new markets.