Extras on Excise: Oregon Is Clearing the Regulatory Haze with a Start Date for Legal Marijuana Sales and a New Taxing Scheme

The Oregon electorate voted to legalize recreational marijuana on November 4, 2014 via Measure 91 and the government has since been busy developing a regulatory and taxing scheme to facilitate legalization. 

Those eagerly anticipating the day when they can legally purchase recreational marijuana in Oregon got some wonderful news last week with the passage of H.B. 460. Signed by Gov. Kate Brown (D) on July 27, the bill authorizes medical marijuana dispensaries to sell retail marijuana in limited quantities beginning October 1. So, while the licensing process for growers, wholesalers, processors and retail outlets does not begin until January 2016, recreational users have a legal alternative in the meantime.

With this move, Oregon will begin legal sales less than one year after recreational marijuana was legalized by the voters. This is significantly faster than both Washington and Colorado, which both voted for legalization in 2012 but did not begin legal sales until 2014.

In other marijuana-related activity, the Oregon governor signed H.B. 2041 on July 20, which establishes a 17 percent tax on the retail sales price of the following:

  • Marijuana leaves and flowers;
  • Immature marijuana plants;
  • Cannabinoid edibles, concentrates and extracts;
  • Cannabinoid products to be applied to the skin or hair; and
  • Any other cannabinoid products.

This tax is to be paid by the consumer and collected at the point of sale by the marijuana retailer, who is responsible for remitting the tax to the Oregon Department of Revenue on a quarterly basis.

While Measure 91 established a tax on marijuana producers, legislators decided to repeal that tax in favor of the retail tax detailed above. Additionally, while medical dispensaries will not collect the new retail tax when beginning recreational sales on October 1, if they continue to make those sales on and after January 4, 2016, H.B. 2041 requires that they collect tax on the recreational marijuana they sell at the rate of 25 percent tax of the retail sales price. 

In addition to the state tax established by H.B. 2041, Oregon localities now have the power to tax marijuana with the passage of H.B. 3400, signed by the Governor on June 30, 2015. The bill further amends the provisions of Measure 91, which did not provide for a local option tax. Localities are now permitted to impose a tax of up to 3 percent on the production, processing or sale of marijuana items in the local area. Before implementation however, an ordinance imposing a tax on marijuana items must be approved by the electorate of the locality at the next statewide general election.