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New bill would tax illegal marijuana grows in effort to combat black market

  • Author: Laurel Andrews
  • Updated: September 28, 2016
  • Published March 20, 2016

Unlicensed marijuana growers who are discovered with more cannabis than allowed under personal grow laws may find themselves subject to both criminal and tax penalties, should a bill circulating the Alaska Legislature be signed into law.

House Bill 337, sponsored by Rep. Gabrielle LeDoux, R-Anchorage, seeks to give the state Department of Revenue's Tax Division more enforcement power.

"It's going to help the legitimate marijuana industry get off the ground," LeDoux said of the bill Saturday. "That's my purpose."

The bill has three different mechanisms for enhancing tax enforcement of marijuana grows.

First, the bill would require that licensed growers pay a $5,000 cash or surety bond to the Tax Division. That money would be forfeited to the state should the grower fail to pay its commercial grow taxes.

The requirement is in line with what's required from the alcohol industry, except it's one-fifth the cost, said Ken Alper, director of the Tax Division. Whereas the alcohol industry must provide a $25,000 surety bond, the state anticipates marijuana businesses will struggle to find loans.

"We didn't think it would be fair" to require a more costly bond, Alper said.

Second, the bill would make manufacturers and retail stores secondarily liable for the unpaid taxes of any cultivation facility that provides them with marijuana. The provision is intended to cut down on bootlegging, Alper said.

"We see a legitimate possibility that there will be unlicensed growers attempting to sell their products" to retail stores, Alper said. If retailers and manufacturers are also liable for those unpaid taxes, they will be deterred from doing business with the black market, Alper said.

Third, unlicensed growers found to have more marijuana than what's allowed under personal statutes would be taxed $50 for every ounce over the personal grow limit, the same taxation that applies to licensed growers.

The bill would not be retroactive, so current cases involving marijuana busts would not be subject to the tax, LeDoux said.

Under Alaska's initiative, every individual is allowed to possess six plants, three of which can be flowering. The state has defined "possession" as being within a person's physical control, so that means six plants are allowed per household, under the state's interpretation. Alaskans can keep all the marijuana harvested from those plants, regardless of quantity.

House Bill 75 would raise that limit to 12 plants per household, but the bill is being held under unfinished business as of March 16, online records show.

Unlicensed growers could find themselves facing both criminal and tax penalties, as Alaska's criminal statutes haven't changed. Any marijuana conduct not specifically outlined in Alaska's ballot measure that passed in November 2014 remains illegal.

The Legislature's bill amending criminal statutes, Senate Bill 30, hasn't budged this session -- it's held in the House Judiciary Committee, which LeDoux chairs. She previously said that she has problems with a provision in the bill opting the unorganized borough out of the commercial marijuana industry.

"It's not going anyplace," LeDoux said of the crime bill. "That doesn't mean that once the industry gets off the ground … we can't come back and revisit things."

LeDoux believes that the tax penalty bill "is going to put these folks on the same playing field as the legitimate growers," she said Saturday.

The tax provision was envisioned partially as an alternative to criminal prosecution, Alper said, in cases where a small amount may not be prosecuted. He noted that in the Homer bust last month where police found more than $1 million worth of marijuana plants, the state would have been owed $250,000 in taxes.

"Whether or not it's still a felony to own too many plants doesn't matter too much to the Tax Division," Alper said.

The bill is scheduled for a hearing in the House Labor and Commerce Committee at 3:15 p.m. Monday.

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