Alaska’s cannabis industry searches for solutions to slowed growth

FAIRBANKS, Alaska (KTVF) - Like many industries, the cannabis industry was impacted by the Covid-19 pandemic. However, as the industry recovered, the boom that it once saw dramatically slowed down.

“When a new industry starts out, often times it has a pretty steep trajectory in terms of growth,” Said Governor Mike Dunleavy. He also said in due time those markets level out.

The plateau in Alaska’s cannabis industry stems from multiple areas. One of the biggest areas of concern is the cannabis tax, specifically the tax model being used for cannabis. In Alaska, the state applies an excise tax on cannabis “It’s put in place when the marijuana goes from the cultivator to either the manufacturer or the retail establishment,” said Karinne Wiebold, an economist with the Alaska Department of Labor and Workforce Development. This system taxes cannabis cultivators based on the quantity of plant being harvested.

“Before 2019, it was a flat rate of $50 dollars per ounce of bud, which is the highest value product and then it was $15 an ounce on what is considered trim,” said Wiebold. Since 2019, the taxes have factored in the quality of the crop as well. Bud is now taxed at $50 an ounce for normal quality and lesser quality or immature bud is only $25 an ounce.

Despite these changes, the marijuana task force is recommending the state switch to a sales tax. “Retailers are best suited to collect the taxes,” said Brandon Emmett, owner of Good Titrations and co-chair of the marijuana task force. “They have much more steady cash flow and almost every retailer is already collecting municipal taxes.” The task force believes this could be accomplished through a tax collection partnership between the state and municipal governments.

Some in the industry agree with the task force’s idea. “I think that’s a change that would make a lot of sense and I think we’ve been asking for that since the very beginning,” said Keenan Hollister, owner of Pakalolo Supply Company. Others, however, think the change would be moot. “If you reduce the tax for the cultivator... their price is going to go down too. So, I don;t think they’re going to benefit as much as they think they will,” said Dan Peters, owner of GoodSinse.

Statewide, municipal cannabis taxes equaled about $34,000 in 2022. In comparison, the state mandated excise tax generated about $30 million in tax revenue in 2022. The city of Anchorage collected about $185,000, the city of Fairbanks and the Fairbanks North Star Borough collected about $23,000 in combined taxes and the Matanuska-Susitna Borough collected over $35,000.

While tax revenue has slowed, the industry’s employment numbers have continued to grow. Due to the growth, the task force is recommending the state allow and support post-secondary education programs for cannabis. This would allow the universities in Alaska to study cannabis and train students to work in the industry. If such programs were implemented, the more skilled laborers could provide services that are much needed in the industry. This includes working in testing facilities, both of which are in the south central region of the state, making cannabis cultivation and production more expensive. By increasing trained workers specific to the industry, the state could lower the costs of their regulation process and the business operators could increase their revenue.

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