The latest data from Oregon’s Department of Revenue shows that the state’s legal marijuana market will generate more tax revenue than expected in 2016.
Oregon’s statewide marijuana tax revenue for 2016 totaled over $54 million as of November 30, according to the state’s Department of Revenue. Although Oregon’s recreational market has been hindered by strict regulations, the annual revenue totals exceed predictions.
The state’s Oregon Liquor Control Commission (OLCC) had projected that cannabis sales would generate $10.7 million for the 2015 to 2014 biennium, while the Oregon Financial Estimate Committee had predicted that the tax revenue generated would be between $17 million to $40 million annually. Both have shown to be well short of what the state has so far collected.
Oregon voters passed Measure 91 to legalize recreational marijuana in 2014, but sales didn’t begin until October 2015. Dispensaries were initially allowed to sell marijuana tax-free before the OLCC started to take over operations this past February. Since then, both dispensaries and retail stores have sold recreational marijuana and applied a 25 percent sales tax.
Oregon’s recreational marijuana sales surpassed $100 million between January and July, then hit the $160 million mark in September, indicating at the time that sales were growing. The most recent data from the Department of Revenue confirm that cannabis tax payments increased throughout the year since it started collecting them in February. In October, tax receipts statewide totaled $7.8 million, up from $2.4 million in February.
Under Measure 91, 40 percent of marijuana tax revenue goes to the Common School Fund. The remaining money goes to help fund state and local law enforcement agencies, as well as mental health and alcoholism and drug services.
Oregon is one of eight states that have so far legalized adult use marijuana. Adults 21 and older are legally allowed to possess up to 1 ounce of marijuana in public and up to 8 ounces of homegrown cannabis at home. Adults are also allowed to cultivate up to 4 plants.
The fact that Oregon’s marijuana sales are exceeding expectations is surprising. The industry has been dealing with production delays caused by the strict testing regulations set forth by the Oregon Health Authority. As of October 1, the authority implemented a set of stringent guidelines for product labeling, transferring, packaging, testing, and concentration limits. The state’s market has struggled to maintain its supply of marijuana products.
The tax rate that Oregon applies to marijuana sales will eventually drop from 25 percent to 17 to 20 percent once the OLCC transition is complete at the end of the year. Starting January 4, 2017, the only medical dispensaries that will be allowed to continue selling recreational marijuana are ones that have been licensed to do so by the OLCC.
“It is crucial that dispensaries stop selling products to retail customers after Dec. 31, 2016,” said Andre Ourso, manager of the Oregon Medical Marijuana Program at the OHA Public Health Division. “This is a statutory requirement. Anyone caught selling to retail customers could face serious penalties.”
The changeover is expected to slow retail marijuana sales, but only for a short period. There are 350 dispensaries currently registered with the health authority, according to Oregon Live, and just 85 retailers are licensed to sell recreational marijuana. However, the OLCC is reviewing 285 retail applications and 411 producer applications.
Oregon’s recreational marijuana market is clearly still working out the kinks until the full launch of the recreational retail market, but 2016 sales indicate that there’s no shortage in demand.