How powerful a force is cannabis the commodity? It fits somewhere in between Mighty Mouse and Jesus.
The magical herb already produces mighty tidy prophets for governments large and small.
In today’s inhibited environment “economic savior” is probably overkill . . . but down the road, with cannabis commerce basking in the vitalizing rays of legalization – it wouldn’t shock me at all.
Can cannabiz attack your city or state’s fiscal deficit? Yessiree, the cannabiz can. Is it time to canonize cannabiz? Cannabis Commerce already has.
$160 million, easy
An easy $160 million worth of sales tax alone has been unearthed in the pot stronghold of the Rockies.
I’m getting to the accounting.
First, it has to be said that we can finally have “fun with sales tax figures” now that medical marijuana carecenters (MMCs) in Cannafornia and Cannarado have served an insatiable public several years running.
In Stardate 2010, we can mine actual MMC pricing data — and make meaningful inferences about the readiness of The World’s Most Promising Commodity to assume its rightful place as a dependable producer of government revenue a la alcohol and tobacco.
Fortunately, playing around with sales tax figures is refreshingly devoid of the abstract equations government-beholden entitities like the RAND Corporation use to obfuscate pot tax predictions. These can be presented in perfectly simple arithmetic.
Play the game
Here’s how to find $160 million, if you know where to look:
- Around 1,500 Cannarado dispensaries applied for state operating licenses before the filing deadline of July 1, 2010.
- Let’s “err on the side of caution” and estimate that each of the 1,500 retail dispensaries sells half a pound a day. In other words, collectively the state’s dispensaries sell 750 pounds daily.
- There are 448 grams in a pound. Therefore, 750 pounds times 448 grams = 336,000 grams, a reasonable guesstimate of the amount of grams sold daily in Cannarado dispensaries derived from actually interviewing owners.
- Let’s assign a ridiculously low average price of $10 per gram. Multiplying 336,000 grams by $10 = $3,360,000. In other words,around $3,360,000 worth of marijuana is sold in Cannarado dispensaries daily.
- The state sales tax on medical marijuana is 3.25%. So, 3.25% of $ 3,360,000 = $109,200 in state sales tax collected daily by the State Department of Revenue.
- $109,200 a day state sales tax multiplied by 365 days in a year = $39,858,000 a year for the state. Call it $40 million.
What if every municipality allowed dispensaries?
Now, stop and consider the fact that dispensaries are banned in too many Cannarado municipalities (I’m suppressing the temptation to editorialize). Also, the number of dispensaries is presently frozen until July 1, 2011, pending further review. Let’s be “plaid pants” conservative and claim there’s room for 25% more dispensaries, that is, if they were allowed to operate freely all over the state.
That would bring the state sales tax revenue up 25% ($10 million), from $40 million to a number which rounds off to $50 million. Hold that thought.
What about city sales tax?
It’s a fact that each municipality collects roughly the same city sales tax percentage, 3.25%, that the state charges. That’s another $50 million.
So, the combined city and state sales tax figures amount to around $100 million in “Cannarado” from sales of raw buds.
What about edibles?
However, we haven’t accounted for the increasing amount of edibles (brownies, sodas, fruit bars, cereals, lollipops, ice cream, you name it) sold yet. Let’s guesstimate edible sales constitute 10% of dispensary sales. Bump $100 million 10% ($10 million) to $110 million.
And cultivation supplies?
Then there’s the matter of sales taxes for cultivation supplies necessary to grow “medical marijuana” (quotes because there’s no legal standard for what constitutes medical marijuana as opposed to just plain marijuana).
We’re talking about grow lights, soil, nutrients, hydroponic and aeroponic supplies, climate control systems, containers, etc. I don’t know that there’s any hard data yet about what this industry grosses statewide, but I’ll make an educated guess from actually talking to growers that production costs – not including labor or electricity – to produce the 750 pounds sold daily in the state’s MMCs come to at least 10% of the selling price of the buds.
10% of $110 million is $11 million. That bumps our ultra-cautious guesstimate to $121,000,000 million.
Underground > Overground?
It’s important to note we’ve only talked about legal, above board, medical marijuana sales. Lots of people who’d love to transact at dispensaries have personal and professional reasons not to obtain medical marijuana cards. If certain “stigmas” were removed, or federal prohibition were repealed, how many more buyers would there be then?
Does a third more sound believable? The actual percentage would probably be greater than that. Who wouldn’t want to pick from twenty strains instead of one, if they had the choice?
Take a third of $121,000,000 — around $40 million — tack it on, and land in the $160 million range.
Now we’re getting somewhere.
Your turn to play
In reality, most dispensaries sell more than a half pound a day. Most grams sell for much more than $10.
However, not all those dispensaries will get the licenses that they applied for. But more will be allowed to apply come next summer.
So, if you want to play the game, you can fool around with all these variables and see what you come up with. If you’re really gung ho, you can input these figures into a simple spreadsheet, like you’d do for any other business, and see what you come up with.
For example, an average price per gram in November, 2010 is really closer to $15 than $10 (and plenty sell for $18/gram). Therefore, without accounting for edibles or cultivation supplies, there’s $150 million possible in annual city and state sales tax based on pure buds alone (we previously calculated $100 million @ $10/gram).
Just plug in any variable and guesstimate — every economist admits they do the exact same thing, as proven beyond a shadow of a doubt here.
Preview of coming tax attractions
I’ll stop there – that’s a bunch of figures to process. Keep in mind that we haven’t discussed the inevitable sin taxes coming down the pike, licensing fees, or personal and business state income taxes. Fear not: we will, in another post.
Perhaps you’re getting the idea that you don’t need an Economics PhD to add up what a thriving poteconomy means for your state’s coffers? And we’re just warming up . . .