10 Year Analysis Complete for House Bill 2037

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UPDATE: The 10 year analysis for HB 2037, titled AN ACT Relating to modernizing adult use cannabis laws, has been completed. The Office of Financial Management has identified this bill as requiring a ten-year projection of increased cost to the taxpayers or affected fee payers.

Ten-year projection:

Fiscal Year		Cannabis producer/processor/retailer license fee
2026		$58,788
2027		$111,780
2028		$117,576
2029		$117,576
2030		$117,576
2031		$117,576
2032		$117,576
2033		$117,576
2034		$117,576
2035		$117,576
Total:		$1,111,176

Department of Revenue:

CURRENT LAW:

A cannabis license may not be issued to a person doing business as a sole proprietor who has not resided in Washington for at least six months prior to applying for a license. The annual license renewal fee for a Washington state cannabis producer, processor, or retailer is $1,381.

No business and occupation (B&O) tax exemptions exist for cannabis businesses.

PROPOSAL:

This bill removes the Washington residency requirement for cannabis licensees. The bill also creates an out-of-state annual cannabis license renewal fee different from the in-state annual cannabis license renewal fee. The annual license fee for an out-of-state cannabis producer, processor, or retailer is $1,657.

This bill provides two exemptions from B&O tax for cannabis producers, processors, or retailers who will obtain licenses with the Liquor and Cannabis Board (LCB) under the Cannabis Social Equity program.

One exemption begins when the licensee exceeds $5,000 in sales and lasts for five years.

This tax exemption expires July 1, 2039.

The other B&O tax exemption is available to a cannabis producer, processor, or retailer who either:

- Obtains the license by transfer or assumption from a licensee in the Cannabis Social Equity program, if the cannabis producer, processor, or retailer who obtains the license also meets the social equity applicant criteria.

- Obtains the license by transfer or assumption from a licensee who meets the social equity applicant criteria and previously received the license by transfer or assumption as described above, if the cannabis producer, processor, or retailer who obtains the license also meets social equity applicant criteria.

This tax exemption begins after the date each eligible cannabis producer, processor, or retailer obtains or assumes the license and lasts for five years.

This tax exemption expires June 30, 2052.

EFFECTIVE DATE:

The bill takes effect 90 days after the final adjournment of the session. However, due to the time it will take to program this bill's changes, the department cannot implement the bill until October 1, 2025.

REVENUE ESTIMATES: 

The revenue impact of this bill is indeterminate because of the lack of data or information on cannabis licensing issuances under the Cannabis Social Equity program.

Ten-year projection prepared in consultation with the following agencies:

Department of Revenue
Liquor and Cannabis Board


Bill sponsors and contact information:




Legislative Bill Information Website: http://apps.leg.wa.gov/billinfo/

Initiative 960 Website: http://www.ofm.wa.gov/tax/default.asp