Extras on Excise: Will Legal Marijuana Be Coming to D.C.? – The District’s Battle for Legal Pot


With only days remaining before Initiative 71 is projected to become law, District of Columbia officials continue to fight to fully legalize, regulate and tax marijuana sales within the District.

In the face of a federal prohibition against spending money on marijuana legalization efforts, the D.C. Council recently held a roundtable meeting about B21-0023, a bill that would legalize marijuana, impose excise taxes on sales and set up a regulatory scheme for the legal marijuana industry.

Originally scheduled to be a full hearing on the bill, the meeting was downgraded to a “roundtable” after D.C. Attorney General Karl A. Racine advised the council that holding a hearing would violate a rider in the omnibus spending bill passed by Congress in December that prohibits D.C. from using federal or local funds for efforts related to marijuana legalization. In his letter to the council, Racine wrote that it would be unlawful under section 809 of the Financial Services and General Government Appropriations Act, 2015 to hold a hearing because a hearing is part of the legislative process, which involves the expenditure of public funds. Racine also advised the council that a hearing could violate other federal civil and criminal provisions and even subject District employees to personal liability for violations.

During the roundtable, numerous individuals offered testimony about B21-0023, the Marijuana Legalization and Regulation Act of 2015. Councilmembers and legalization advocates discussed how legalization efforts have gone in other states, as well as how to set the tax rate at a level that encourages use of the legal marijuana marketplace and prevents tax cascading that makes marijuana products cost prohibitive for consumers.

As currently written, marijuana would be subject to the following taxes under the bill: 

  • a 10 percent sales tax based on the gross receipts from the sale of retail marijuana or marijuana products, and

  • an additional 15 percent excise tax based on the average market rate of unprocessed retail marijuana, imposed at the time of the first sale or transfer on unprocessed retail marijuana by a cultivation facility to a manufacturer, retail store or another cultivation facility.

Businesses looking to enter the legal market would pay initial application and annual licensing fees. Occupational licenses/registrations for owners, managers, operators, employees, contractors and other support staff would also be required.

Several individuals expressed concern during the roundtable about the proposed tax rates because the number of times that marijuana and marijuana products could be taxed could raise the price, making it cost prohibitive for consumers to purchase marijuana at licensed establishments, and instead push them towards continued use of the unregulated and illegal black market.

In response to concerns about the tax rate possibly being too high, Councilmember Vincent Orange (D-At Large), one of the primary sponsors of the bill, said that the proposed taxes in B21-0023 are the lowest in the country.

Will legal marijuana be coming to D.C. any time soon?

Many are wondering if Initiative 71, which was passed by voters and “enacted” before the rider was attached to the spending bill, will even be approved by Congress. Its 30-day review period is set to end on Feb. 26, and if not disapproved it will become law on that date. The initiative only legalizes marijuana possession—it does not legalize marijuana sales or impose any taxes. It also does not set up a regulatory scheme to support a legal marijuana industry.

The fate of bills like B21-0023 is much less certain. But D.C officials are moving forward with discussions about full legalization in the District anyway, and there is no sign that those efforts will stop any time soon.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should Congress prevent D.C. from fully legalizing, regulating and taxing marijuana?

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