1. LuAnn Bower, Genevieve John, Walter Kookesh PADM 628

2. Taxation of Recreational Marijuana Current State of Alaska Sin Taxes Current Municipality of Anchorage Sin Taxes Best Practices: Colorado and Washington State State of Alaska Taxation Municipality of Anchorage Taxation Taxation comparisons Recommendations

3. Timeline of Events November 4, 2014 – Passage of Ballot Measure 2 February 24, 2015 – Ballot Measure 2 becomes law November 24, 2015 – Deadline for board to adopt recreational marijuana regulations February 24, 2016 – Board must start accepting applications for recreational marijuana businesses May 24, 2016 – Initial recreational marijuana licenses expected to be awarded

4. Sin Tax A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. These type of taxes are levied by governments to discourage individuals from partaking in such activities without making the use of the products illegal. These taxes also provide a source of government revenue. Sin taxes are typically added to liquor, cigarettes and other non- luxury items. State governments favor sin taxes because they generate an enormous amount of revenue and are usually easily accepted by the general public because they are indirect taxes that only affect those who use the products. When individual states run deficits, the sin tax is typically one of the first taxes recommended by lawmakers to help fill the budget gap.

5. Current State of Alaska Sin Taxes Gaming (bingo, raffles and lotteries, pull-tab games, ice classics, rain classics, mushing sweepstakes, fish derbies and contests of skill within the state) Alcohol Tax Tobacco Tax Shared Tax Liquor License Fee – 100% shared with local governments – such as Municipality of Anchorage (except late fees and collection costs)

6. Current State of Alaska Sin Taxes

7. State of Alaska Sin Taxes - Alcohol Alcohol Tax – by the gallon Liquor (> 21% Alcohol) $ 12.80 Wine (< 21% Alcohol) $ 2.50 Beer, Malt Beverages &Hard Cider $ 1.07 Approved Reduced Rate Brewery $.35 Shared Tax Liquor License Fee – 100% shared with Municipality of Anchorage (except late fees and collection costs) This accounts for 1.7% of revenue from Excise taxes (not the same as Sin tax totals)

8. State of Alaska Sin Taxes – Tobacco Tobacco Tax Cigarettes - a roll for smoking of any size or shape, made wholly or partly of tobacco whether the tobacco is flavored, adulterated, or mixed with another ingredient, if the wrapper or cover of the roll is made of paper or a material other than tobacco Other - include cigars, also known as cheroots or stogies, perique, snuff and snuff flour, smoking tobacco, including granulated, plug-cut, crimp-cut, ready-rubbed and any form of tobacco suitable for smoking in a pipe or cigarette, chewing tobacco, including cavendish, twist, plug, scrap, and tobacco suitable for chewing, or articles or products made of tobacco or a tobacco substitute, but not including cigarettes as defined above

9. State of Alaska Sin Taxes – Tobacco Tobacco Tax Cigarettes AK is ranked 12th with many other states for taxes at $2.00 per pack of 20. Juneau is considered in the top 5 state-local combined tax rate at $5.48 per pack Federal cigarette tax is $1.01 per pack. Other excise tax on tobacco products (other than cigarettes) is 75% of the wholesale price of the tobacco products

10. Current Municipality of Anchorage Sin Taxes Cigarettes Other Tobacco Products Liquor License Fee

11. Current Municipality of Anchorage Sin Taxes Cigarettes – excise tax is calculated by a mill rate each year January 1, 2015 – mill rate was 11.94 cents per cigarette FY 2014 - $19.1 million excise tax collected on cigarettes

12. Current Municipality of Anchorage Sin Taxes Other Tobacco Products (OTP) - cigars, cheroot, stogie, perique, snuff and snuff flour, smoking tobacco, chewing tobacco, and any article made of tobacco or tobacco product. OTP excise tax – 55% of the wholesale price FY 2014 - $3 million collected on OTP

13. Current Municipality of Anchorage Sin Taxes

16. Best Practices: Growing Market

17. Best Practice: Licensing and Fees Washington State Chose to regulate Recreational Marijuana the same way as Liquor 3 Types of licenses; Producer, Processor, and Retailer Holder cannot hold more than 2 permits Producer and Processor – Cannot be combined with Retail permit Limited Number of Applications available 334 – Retail Permits Producer & Processor – No Limit Fees: $250 application fee $1000 annual renewal fee Applications are not guaranteed to be accepted

18. Colorado $250 Application Fee, Collected by the state Retail stores Cultivations facilities Infused products manufacturing (edibles) $5,000 License fee to the City of Denver – One time $3,000 Annual Renewal Fee $500 Testing Facility License, Collected by the State All fees are non-refundable No Guarantee that your application will be accepted Best Practice: Licensing and Fees

19. Best Practices: Denver http://www.denvergov.org/businesslicensing/DenverBusinessLicensingCenter/Reta ilMarijuana/tabid/445028/Default.aspx

20. Best Practice: Financial Outlook

21. Best Practices: Taxation Washington State Sales Tax of the state 25% excise tax at each level of production Producer to Processor Processor to Retailer Retailer to Customer Business and Occupation taxes of Washington State Is a Gross Tax receipt Measures the Value of products Gross Proceeds of sale Gross income of business Current process, Washington State could generate more than $10 million in excise tax

22. Best Practices: Taxation Colorado During legalization voters also accepted the established tax rates for the market 10% in taxes 10% special tax – Fund marijuan enforcement 2.9% sales tax – same tax added to retail sales Colorado Legislative Council estimates the tax on buyers and producers could bring in $33.5 million the first year and as much as $67 million the following year

23. Best Practices: Money & its Designation Washington State Revenue generated from the production and sale of Recreational Marijuana could bring in $1.9 billion in first 5 year, which can go towards Social and Health programs Marijuana use hotline Alcohol and Drug Abuse Institute at UW Alaska could designate the revenue to assist with its own social issues Treatment/Rehabilitation Centers and program and the Chronic Inebriate population

24. Best Practices: Money & Its Designation Colorado Building Excellent Schools Today (BEST) Included in the ballot measure was a 15% excise tax on marijuana producers to raise revenue for school construction Colorado has already generated $15 million in tax revenue specifically earmarked for public schools As of January 2015, record sales of Recreational Marijuana have produced more than $2 million in excise taxes flagged for school in just one month

25. What is the best way to tax recreational marijuana in the State of Alaska? Marijuana Production tax Marijuana Wholesale excise tax Marijuana Retail sales tax Other Marijuana Taxes Keep an eye out for the “Spring 2015 Revenue Sources Book” on the Department of Revenue, Division of Tax website for more details about a State Marijuana Tax Local governments will be constrained by State law

26. What is the best way to tax recreational marijuana in the municipality of Anchorage?

27. What are other cities tax on recreational marijuana?

28. Oregon Marijuana Excise Tax Estimated $17-$40 million in annual state revenue 10% shared with local governments who allow retail recreational marijuana shops City of Portland's share - $171,000 - $556,000 City of Portland Marijuana Sales Tax Additional 10% to gross sale of recreational marijuana Additional $1.7-$4.0 million annually

29. Recommendations Recreational Marijuana Sales Tax (muni of Anch) Potential for revenue sharing with the State Potential Profit from Taxation Education Rehabilitation Public Safety

30. Questions ?