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Alaska marijuana tax revenue dropped in January

  • Author: Laurel Andrews
  • Updated: March 1, 2017
  • Published February 28, 2017

Marijuana plants grow at the AK Fuzzy Budz facility in Anchorage, November 2016. (Marc Lester / Alaska Dispatch News)

Alaska's marijuana tax revenues decreased in January as supply shortages caused many shops to shut down temporarily or reduce their hours.

Seventeen growers paid $107,500 in January taxes to the Department of Revenue's Tax Division, according to data from Kelly Mazzei, revenue audit supervisor.

That's $38,300 less than in December, when $145,800 was paid to the state treasury.

Under Alaska law, growers pay the state's tax. Bud is taxed at $50 per ounce, and other parts of the plant, like the stems and leaves, are taxed at $15 per ounce. Payments are due at the end of the following month, so January's taxes were due at the end of February.

In January, 111 pounds of bud was sold, and 77 pounds were sold from other parts of the plant.

All told, Alaska has collected $344,800 in taxes since the first tax payments. The state's first marijuana shops opened during the last few days of October.

In the spring of 2016, the tax division estimated that fiscal year 2017 (which runs July 1, 2016 to June 30, 2017) would bring in $12 million in marijuana tax revenue.

But last fall, that estimate dropped to $5 million, Mazzei wrote.

The licensing process took longer than anticipated, so growers didn't pay the first taxes until November, Mazzei said. The division also didn't factor in supply shortages, which it says caused January's tax slump.

Many shops had to close down temporarily, or shortened operating hours in January, lacking enough cannabis to meet demand.

"We think the demand is there, and as soon as the supply can meet demand, we hold that our forecasted amounts are on target," Mazzei wrote.

The division would need to collect about $1 million in taxes for the next five months to hit that estimate, she wrote.

Supply shortages were likely partially based on the fact that many grows started up around the same time, said Leaslea Nunley, owner of Tanana Herb Co. in Fairbanks.

"Harvests are like six to eight weeks apart … so you're going to have that lag between one harvest and another until everybody gets rolling," Nunley said.

Tanana Herb Co., an indoor cultivation facility, was in between harvests in January, Nunley said.

The company was preparing dried marijuana for sale, which didn't go out until the end of the month, Nunley said. The business sold more cannabis in February, she said.

Kenai Peninsula cultivator Greatland Ganja sold far more marijuana in December than January, said co-owner Leif Abel.

That's because in December a number of retailers opened their doors, Abel said.

Among those retailers were the first two shops in Anchorage. At the time, no marijuana grown in Alaska's largest city was ready for sale, so Anchorage stores had to rely on weed from other communities. All three of Fairbanks' marijuana stores were shut down for weeks in January due to supply issues.

Nunley said she expected supply woes to ease up soon. To date, many marijuana stores still keep shortened hours, or only open a few days a week.

"Supply issues are slowly improving with lots of new cultivators on the horizon but are still (affecting) everyone," wrote Keenan Hollister, co-owner of marijuana shop and cultivation facility Pakalolo Supply Co. in Fairbanks.

And come summer, Alaska may see another shortage as tourists arrive in the state, Marc Theiler, owner of Red Run Cannabis shop, predicted in January.

At Greatland Ganja, a small crop was harvested in January, Abel said. But the company's business model is based around a large outdoor summer harvest and smaller indoor crops to supplement income through winter months.

Last summer's crop just sold out, Abel said.

Abel said the company wouldn't be making large tax payments again until next fall. In February, Greatland Ganja's sales would produce even less tax revenue than the month before, Abel said.

The 17 growers who paid taxes in January are spread through many different communities: Two were in Anchorage, five were in Fairbanks and three were in Kenai. Homer, Juneau, Kasilof, Seward, Sitka, Sterling and Valdez each had one grower that paid January taxes.

Eight cultivators paid their taxes in cash, and nine paid with either check or cashier's check.

Half of the tax revenue will go to the state's general fund. The other half has been appropriated to programs aimed at reducing repeat criminal offenders.

The tax division's current marijuana tax estimate for fiscal year 2018, which begins July 1, is $10.8 million. An updated spring forecast will be released in March, Mazzei wrote.

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