Marijuana Tax Revenue

Posted on July 19, 2021Comments Off on Marijuana Tax Revenue

Deschutes County Battles Hard To Get Marijuana Tax Revenue

In December 2020, Deschutes County sued the Oregon Liquor Control Commission and two other state agencies, the Department of Revenue and the Department of Administrative Services, over the year-long nonpayment of marijuana tax revenue since August 2019.

The nonpayment started after the county released an ordinance that suspended the issuance of marijuana production licenses to new businesses seeking to grow or process cannabis in the county. This ordinance does not affect existing businesses licensed to grow or process cannabis in the incorporated cities of Bend, Redmond, Sisters, and La Pine. 

According to public records, the Deschutes county board suspended licensing of new cannabis production businesses in August 2019 and residents later voted to uphold the suspension in November 2020.

Despite the county government and residents’ consensus to bar unlicensed businesses from getting the license to produce and process marijuana in the county, the defendants maintain Deschutes is not a full participant in Oregon’s marijuana economy.

The state government agencies based their defense of the nonpayment on ORS 475B.755 et seq. The statute essentially says a county receives marijuana tax revenue if it participates in Oregon’s marijuana economy. 

However, the agencies and Deschutes county have continually disputed the interpretation of this statute.

The OLCC, for instance, said a county could only receive marijuana tax revenue if it allowed all marijuana business activity within its borders. Thus, failing to license new marijuana businesses made Deschutes County ineligible to receive outstanding and future tax revenue, regardless of the continued operation by existing producers and retailers in the county. 

Per this interpretation, the OLCC maintained that it would only pay tax revenue to Deschutes if the county allows all marijuana business activity, including new businesses that meet the requirements to acquire a growing and processing license.

The county countered the hard-nosed interpretation of the statute. According to county officials, existing businesses continue to grow and process marijuana without restriction. Ergo, Deschutes participates in Oregon’s marijuana economy. More importantly, the statute in question does not directly address the situation in Deschutes County. Furthermore, the continued operation of licensed marijuana businesses within the county makes it a top contributor to the state’s marijuana economy.

Public data revealed Deschutes’ licensed marijuana businesses make a monthly contribution of $5 million to Oregon’s marijuana sales every month. Public records also show that the Deschutes marijuana businesses that have continued operation have generated a gross $105 million revenue since August 2019. 

Oregon legalized the recreational use of marijuana by adults, but it levies a 17% tax on the sale of all cannabis products within the state. Per Measure 110, 40 percent of the tax revenue goes to the Oregon school fund, while 20 percent of the state tax on marijuana provides broader access to mental health, alcoholism, and drug services. 

Meanwhile, Oregon allocates 15 percent of the tax revenue to law enforcement, particularly the Oregon state police. Likewise, the Oregon Health Authority receives 5 percent of the tax revenue for substance abuse treatment and prevention. 10 percent each goes to cities and counties that participate in Oregon’s marijuana economy. Interested persons may see the history of quarterly distribution since 2017.  

A 17% percent sales tax means Deschutes County had not received at least $17 million in tax revenue since August 2019, when the state departments stopped remitting to the county’s coffers. 

Deschutes County expects that HB 3295 A will change the narrative. If signed into law, HB 3295A will ensure that counties that participate in Oregon’s marijuana economy receive a share of marijuana tax revenue.

Rep. Jason Kropf (D, Bend) introduced HB 3295A, and the bill was sponsored by Rep. Jack Zika (R, Redmond). As of June 30, 2021, the bill has passed senate consideration and awaits the Governor’s signature.

Comments Off on Marijuana Tax Revenue