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Seattle Times coverage of pot policy, culture and lifestyle.

June 27, 2014 at 12:40 PM

Where the money from legal pot goes

A marijuana plant ready to be trimmed. (Photo by Ellen M. Banner / The Seattle Times)

A marijuana plant ready to be trimmed. (Photo by Ellen M. Banner / The Seattle Times)

You’ve probably seen the numbers out of Colorado that suggest the state is raking in the dough from pot sales. How will that play out in Washington? Will Washington be bankrolling schools or building roads with some kush cash? How it works:

Where does the money come from?

Taxes. There are several rungs (and licenses) in the pot-supply chain. Between each rung, a 25 percent tax gets paid out to the state.pottax

For example, if a pot grower (called a producer) sells $100 of pot for processing, the state will collect $25 from the grower.

If that processor then decides to make marijuana-infused cupcakes and sells a package of them to retailer for $150, the processor will pay $37.50 to the state.

And when that retailer sells those cupcakes for $250 to a consumer?

The retailer would pay $62.50 to the state.

A few things to note:

Under the law, producers can also be processors, and therefore avoid a 25 percent tax. Consumers will pay sales taxes as they would when buying any other good. Pot businesses still pay business and occupation (B&O) taxes.

So where does it go?

State sales tax and B&O taxes go directly into the state’s general fund.

The Liquor Control Board will dole out pot excise tax revenue every three months, and I-502 is very specific in outlining its destination. Let’s look at how it will shape out over a full year.

First, $5.72 million of the tax revenue is cut off the top:

- The Department of Social and Health Services (DSHS) gets $500,000 for the Washington state healthy youth survey.

- DSHS also gets $200,000 to create a cost-benefit analysis that outlines the effect of legalized pot on the economy, public health, public safety and quite a bit more.

- The University of Washington Alcohol and Drug Abuse Initiative will receive $20,000 a year to publish “medically and scientifically accurate” information on pot.

- The Liquor Control Board will get $5 million to administer the laws of legal pot.

Didn’t Colorado make $3.5 million from the first month of legalized pot? Surely there will be more tax revenue.

Any extra revenue is earmarked primarily for prevention, research and health, with a chunk for the state’s general fund.

Here’s a breakdown:

How much does the state expect to make out of this deal?

No one really knows.

Initially, the state’s Office of Financial Management said the state could reel in anywhere between zero and $1.94 billion in pot revenue over five fiscal years.

In February, the Washington State Economic and Revenue Forecast Council estimated the state would see $586 million from pot between 2015 and 2019. That number includes revenue from sales tax as well as B&O taxes. Although stores open in July 2014, the council did not make projections of revenue for this year.

Comments | More in Ask Us Anything | Topics: b&o tax, dshs, excise tax

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