Colorado and Washington are Selling a Lot of Pot

In Business, Politics
Colorado - Total Marijuana Taxes and Fees

UPDATE: The data for July has been updated by Colorado.  The monthly tax total has jumped up to just under $13,000,000 at $12.9 million.  This represents roughly $118.6 million in consumption for the month of July.  Note, this is the first full month after the non-Colorado resident restriction of 1/4 ounce per purchase was lifted.  The bulk of the increase in taxes (and assumed consumption) is on the recreational consumption.  Based on what ‘normally’ happens, August will remain fairly high and revenue/consumption is likely to dip from September to November and increase again in December.

With the election/political season in full swing, there’s a lot of states that are taking up votes on both recreational and medical marijuana initiatives.  No matter what your opinion is on the subject (in favor or against), there’s one thing that can be said about the legalization (for recreational use) is that it’s a real money maker for the states where it’s legal.

Colorado and Washington State have been very open about the revenue that they receive and make the data readily available for review, and subsequently for number geeks to over analyze and come up with some estimates based on this information.

Washington State data is available at – for recreational taxes, for medical taxes.

The Colorado state archive of data is available at – Marijuana Tax Data.

The first two charts illustrate the total tax revenue from each state.

Colorado - Total Marijuana Taxes and Fees
Colorado – Chart of total taxes, licenses and fees from marijuana

 

Washington State Marijana Revenue
Washington State – Chart of Total Marijuana Tax Revenue

The total tax revenue being generated by each state is quite obviously increasing, but honestly it’s very difficult to say why from just this data.  The only thing for certain that can be said from the high level data (please forgive the pun there), but both states are absolutely selling a lot of weed.  Washington State, with a population of 7.1 million people is now generating $5 million a month in state marijuana tax revenue on sales of $50 million.  $3.4 million of this is credited to the state with the remaining $1.6 million being credited to local sales and occupational taxes.  The greater majority of this is sold for recreational purposes with 86% of the reported sales being for recreational use.  [Please note, there are a reported 269 registered medical retailers in the state, it is not noted as to the number of recreational retailers.]

The state of Colorado has performed even better.  The tax, license and fee revenue generated in the state has averaged $10.5 million in tax revenue for the last 5 months.  The bulk of the revenue is coming from the 2 retail taxes assigned to the product, a standard 2.9% sales tax plus a special 10% retail tax on the sale of marijuana.  The chart below illustrates the sources of the taxes to Colorado.

Marijuana Tax Sources - Colorado
Colorado – Chart of Marijuana Taxes, Licenses and Fee Sources

The $10.5 million a month in tax revenue generated in Colorado is currently 5.4 million people.  Based on the tax rates mentioned above, I’m estimating that was $575 million worth of marijuana sold in the state in 2015 and in the first half of the year there’s been an estimated $370 million sold.  If the sales stay consistent with the first half of the year, Colorado is on track to sell about $740 million worth of weed this year.  It’s highly likely that the total will exceed $800 million, but I honestly don’t know enough about the market to have a full understanding.

Over the last 12 months, these two states have sold a combined $1.2 billion worth of marijuana to an obviously demanding market.  As I’ve noted above, the combined population of these two states is 12.5 million people, this comes to a total of $96.22 in marijuana revenue per person in these states.  These two states represent 3.91% of the US population.  This extrapolates to a potential national industry of $30.6 billion a year (currently).  At a basic 10% special tax rate this would put an additional $3.1 billion a year into state treasuries, with the current level of unfunded pensions across the country this is going to become more and more tempting across the country.

There is going to be a part 2 to this article as I’m currently reviewing the data from Colorado as much of it is reported at the county level.  It may be possible to do a better projection on the potential size of the industry as it would be foolish to not assume that people are crossing state lines to purchase product that is illegal in their own states.  [Note, Colorado does add a wrinkle to their law which allows out-of-state IDs to purchase one-quarter what a state resident can purchase.  A resident is allowed to purchase 1 ounce for recreational purposes while a non-resident can only purchase 1/4 of an ounce.]

 

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