Alaska marijuana industry hopes tax relief will reduce black market availability

ANCHORAGE, Alaska (KTUU) – The tax rate is too high — that is what the Alaska marijuana industry is saying about the state’s current tax rate on marijuana.

The marijuana industry is asking state lawmakers for help. People in the industry are concerned that if the current tax formula isn’t solved, it could potentially lead the industry into a downward spiral.

Vice president Trevor Haynes of the Alaska Marijuana Industry Association said tax on marijuana in the state of Alaska is outrageous.

“Alaska has, by some estimates, the highest tax rate for marijuana of any legal state right now,” Haynes said. Cultivators here can be taxed as high as $50 per ounce when selling marijuana to a retailer. Haynes said a pound of marijuana can sell for between $1,500 to $3,200 a pound.

“The equivalent tax rate we have for bud is $800 per pound,” Haynes said.

During a recent House Labor & Commerce Committee meeting, legislative aide Cody Rice said House Bill 119 proposes changing the state’s marijuana tax to $12.50 per ounce tax across all categories, and then to phase in a retail sales tax 18 months after passage of the bill.

Haynes said it’s very unusual to have an excise tax like this on an agricultural crop — the cost of which is then passed on to customers at retail shops. Haynes said the higher prices are leading customers to the black market, which is concerning to him.

“You’re getting an untested product, and in the world that we live in where there’s fentanyl being put in everything that is on the black market, it’s very dangerous” Haynes said.

Those same concerns were shared by Brandon Emmett, a representative of Gov. Mike Dunleavy’s Marijuana Tax Task Force, at the House Labor & Commerce Committee.

“Anecdotal evidence suggests that 40% to 50% of the marijuana being sold in Alaska’s market is black market,” Emmett said.

At that same meeting, concern was raised that the current status quo is also causing the state’s marijuana tax revenue to drop — revenue which helps fund multiple programs including drug treatment and education programs along with ways to reduce the number of people returning to prison. In 2021 tax revenue from the industry was more than $30 million, but it has since fallen off.

“So, I have a high degree of confidence and telling you that tax revenue from marijuana this year will be less than last year,” Rice said. “If nothing is done, my estimates suggest revenue be around $9 million a year or less, in three years.”

Haynes said HB 119 is proposing a 10 percent retail sales tax, but Emmett said the marijuana task force believes the tax needs to be lower — maybe as low as 3%.

Committee chair Rep. Jesse Sumner said the proposed bill will be further discussed at a meeting in October or November by the Marijuana Tax Task Force.

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