The launch of retail marijuana in Washington has been rough to say the least. Applications overwhelmed the Washington State Liquor Control Board, forcing a lottery that gave retail marijuana licenses to luckiest business owners instead of the most qualified.
What makes this particular industry even more challenging is the layer upon layer of taxation, and the businesses inability to write off expenses on their taxes because marijuana is still a Schedule 1 drug. This complicates running a business by not allowing for the typical write-offs allowed by the IRS, making the cost of doing business exponentially more expensive.
In Washington, add the three tiered 25% tax and sales tax, and profits dissipate even further as taxes turn into government revenue. For example, Seattle’s Cannabis City (July) brought in more than $2.4 million and has $612,252 to pay just in excise taxes.
The Washington State Liquor Control Board is worried that these excessive taxes could drive buyer back to the black market to avoid the inflated prices caused by the taxation.