SPONSORED: It’s been approximately four years since Alaska’s Ballot Measure 2, which allowed for the legalization and taxation of the sale, production and consumption of marijuana, went into effect, and nearly two and a half years since Alaska’s first cannabis shop opened.
With Alaska still relatively new to the game, regulations for businesses continue to evolve and change. From working to accommodate a rapidly growing new market to navigating tax laws and banking restrictions that are cumbersome at best, cannabusinesses face unique challenges that other retail shops do not.
We caught up with some of Alaska’s cannaprenuers to find out how they navigate today’s market and learn about their hopes and ambitions for the future of the industry.
Knowing how and when to grow
Brandon Emmett, owner of Fairbanks’ Good Titrations, said scaling the business has been one of his biggest issues.
“We have had to grow our business quickly to keep up with demand,” Emmett said. “This keeps us busy with expansions, adding new equipment and hiring more employees.”
He said he spends a lot of time thinking about and visualizing how he wants his business to look.
“There are so many components to scaling a business,” Emmett said. “It’s not only about increasing the size of the machinery, but also about managing different departments. At some point, if you want to be successful, you have to let go and trust the people you hire to manage the people under them in the way they’ve been trained.” Emmett also cites increased consumer demand for higher THC products, as well as vape cartridges and edibles, as being part of the recent surge in business growth.
And while healthy competition is a good thing, Grace Doubrava, who manages Glacier Valley Shoppe in Juneau, said the influx of cannabusinesses offers both benefits and challenges.
“More business helps us to provide consumers with a larger variety of products,” she said. “But of course it also creates more competition with pricing and supply.”
A more competitive market can be a good thing for customers, but Doubrava added that, as is so often the case, shopping for cannabis in Alaska can come with some sticker shock.
“People also tend to compare our prices to places like Washington or Oregon, where the market is more flooded, but right now we don’t have the same level of options that these other states do, and our prices reflect that,” she said.
Banking on better options
One concern you’ll hear from almost any cannabusiness owner or employee: Limits on available banking, as well as the challenges of trying to comply with tax law.
“The federal government does not allow us to use the banking system or postal services,” said Michelle Cleaver, owner of Weed Dudes in Sitka. “Yet we are required to pay federal taxes and are taxed at a higher rate than all other businesses.”
Because cannabis is classified as a Schedule 1 narcotic by the federal government, the businesses that sell it are barred from claiming certain tax deductions; The Tax Adviser reports that this can result in effective tax rates of 90 percent or more.
Then there are the mechanics of paying those high taxes. The IRS collected as much as $4.7 billion from legal cannabis businesses in 2017. Because so many banks are reluctant to do business with the industry, much of this tax money was paid in cash -- and subsequently subject to additional penalties.
“How all of this cash is processed remains something of a mystery,” online publication Quartz reported in November. “But federal spending data reveals the IRS is paying a Virginia company $1.7 million for ‘large cash payments for processing cannabis federal taxes.’”
Emmett said he is confident that the banking situation will improve.
“Two credit unions are now offering services for businesses,” he said. “The downside to that is it’s very expensive. It will cost thousands of dollars a month to utilize, which is going to make it more difficult for smaller businesses. With the (state’s) budget woes, we are not hopeful to get a banking bill to go through this session. But our contacts in the Legislature have grown, and I think we will be able to make some changes in the tax structure.”
Emmett said he does fear that the cost of banking, along with the heavy tax structure, could spell defeat for the industry’s smaller growers.
“As prices fall, smaller shops struggle to compete,” he said. “This happens in all industries, but it is more pronounced in industries that are subject to multiple layers of government regulation.”
A regulatory roller coaster
Nationally, internationally and locally, attitudes and laws continue to evolve. Canada has legalized cannabis nationwide, a process that U.S. lawmakers are watching closely as they consider House Bill 420 (yes, that’s the real bill number), the Regulate Marijuana Like Alcohol Act.
Here in Alaska, proponents of legal cannabis have expressed concerns about changes to the makeup of the Alaska Marijuana Control Board. Emmett served on the board until earlier this year, when he was replaced by Vivian Stiver, who has been vocal in her criticism of legalization.
The newest changes to Alaska’s laws include an endorsement for onsite consumption, which will add a new layer of regulation but has been welcomed by dispensary owners and advocates for Alaska as a cannabis tourism destination. Previously, there was no place for visitors to Alaska to consume cannabis unless they had access to a private home.
The statewide rule permitting onsite consumption went into effect April 11, although local governments may still impose their own restrictions.
“The vote to pass onsite consumption made for a pretty big change,” Doubrava said. “It will have a positive effect for those of us who serve cruise ship passengers and other tourists.”
Suffice to say, the path forward for Alaska’s cannabis industry is far from clear. But the entrepreneurs driving it remain optimistic -- and resolute that their business is good for the Last Frontier.
“Currently Alaska is the only cannabis legal state that requires owner and investors to be Alaska residents,” Cleaver said. “We are employing Alaskans while gaining revenue.”
Besides, she added, there are benefits beyond the economy.
“I have great expectations for us all,” Cleaver said. “I believe marijuana creates a happier, less-stressed population.”
Good Titrations is a Fairbanks business that specializes in producing high-quality cannabis concentrates. Good Titrations products are available at retailers throughout Alaska. Learn more at www.GoodTitrations.com.
Blunt Talk is a series of original articles sponsored by Alaska cannabis businesses and organizations to highlight the real people, families, businesses and groups impacted by the legalization of cannabis in Alaska. Find all the stories and a complete list of sponsors here: Story 1, Story 2, Story 3, Story 4, and Story 5.
This story was produced by the creative services department of the Anchorage Daily News in collaboration with the series sponsors. The ADN newsroom was not involved in its production.