Marijuana revenue distributions indicate strong cross-border sales

By: Emily Makings
12:00 am
October 2, 2015

The Columbian reports that Vancouver is getting more of the marijuana revenue distributions for fiscal year 2016 than any other city — by far.

The Association of Washington Cities (AWC) has the data. The 2015-17 state budget provides that $6 million will be distributed to cities and counties in FY 2016, and only those jurisdictions that have retail sales will receive funds. The distributions are based on actual sales in FY 2015. The charts below show each jurisdiction that is receiving funds this year. Altogether, cities will receive $3.3 million and counties will receive $2.7 million.

Vancouver will get $790,516 this year; the city with the second-highest distribution is Tacoma, with $447,884.

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Looking at the counties, you don’t see Vancouver’s county (Clark), because it banned retail sales of marijuana in its unincorporated areas. King gets far and away the most of the county distributions, with $965,307. The county with the second-highest distribution is Spokane, with $442,917.

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The Columbian:

On Thursday, Vancouver City Manager Eric Holmes said he was surprised at how much money Vancouver was getting in marijuana tax revenue. He noted that the long-term reliability of the revenue amount was uncertain, given that Oregon legalized sales of recreational marijuana Thursday, which could draw out-of-state customers away from Vancouver’s pot shops. . . .

Because Clark County doesn’t allow recreational pot shops, Vancouver and Battle Ground received the county’s share of tax revenue, which would have totaled $496,000 for the 2016 fiscal year, according to Brian Smith, spokesman for the state Liquor and Cannabis Board.

Vancouver’s marijuana revenue of $790,500 amounts to a little more than a half 1 percent of its $137.7 million general fund budget for 2015, according to Lloyd Tyler, the city’s chief financial officer. . . .

“For small cities, any additional source of revenue is always welcome, but does it really assist with the long-term financial viability of any city? Not so sure,” said Maggie Smith, Battle Ground’s finance director. “Like any revenue, it depends on the sustainability.”

As noted by Holmes, Oregon has legal recreational marijuana as of yesterday. Given how far ahead Vancouver is from other cities in the chart above, I think it’s safe to say that there is significant cross-border shopping going on here. The change of law in Oregon will almost certainly have an impact on Vancouver’s receipts. On top of that, as reported by USA Today:

Initially, Oregon’s pot sales will initially be untaxed, and the prices set by individual stores. The state will begin taxing sales at 25% in January after lawmakers spend the next several months crafting a framework for charging taxes and licensing additional retailers.

So, between now and January, not only is it probable that fewer Oregonians will travel north to buy marijuana, but there’s a big incentive to Vancouver residents to travel south: It’s likely the no-tax Oregon marijuana will be less expensive than Washington marijuana, for which the excise tax rate is 37 percent and which is additionally subject to Washington sales tax. All in all, it’s probably good that the Vancouver and Battle Ground officials aren’t banking on this level of revenue long term.

Categories: Categories , Tax Policy.