August 16, 2010

Tax benefits may be bigger than expected

It won't be as big as California's, but state could still reap windfall

By John Richardson
Staff Writer


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Steve DeAngelo is the founder of Harborside Health Center in Oakland, Calif. Here he is in a grow room for clone plants.

John Patriquin

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Portland Press Herald

BERKELEY, Calif. -- California's booming medical marijuana industry is sweet relief for the state's ailing budget, advocates say.

Dispensaries contribute an estimated $50 million to $100 million in sales taxes to the Golden State each year.

Maine, with its far smaller population and tighter limits on marijuana use, won't see anywhere near that kind of money. But some advocates think Maine, fiscally speaking, will be pleasantly surprised with the potency of weed.

Maine's Legislature passed a law earlier this year saying dispensary sales of medical marijuana, unlike prescriptions drugs, would be subject to sales taxes. At the time, state officials gave an estimate of revenue -- just $75,000 a year -- that now looks extremely conservative.

That initial estimate assumed the state's eight dispensaries would have 500 patients in all and sell a combined total of $1.5 million worth of pot at about $50 an ounce.

So far, however, six licensed dispensary operators are projecting an initial customer base of 1,500 patients and prices of $250 to $400 for each ounce of marijuana, translating to $7.8 million worth of sales in their first full year of operation. In the second fiscal year, they project, the numbers would climb to a total of 2,200 patients and about $13 million in sales.

If those sales estimates hold true, Maine would see nearly $400,000 in sales tax revenue the first full year and about $650,000 in year two, which ends in June 2013.

Those numbers may also be low, however. They do not include two yet-to-be licensed dispensaries, one of which will serve York County.

The tax revenue projections also do not include the indirect effects of a new industry that involves commercial growing operations, leases of downtown storefronts and dozens of jobs.

And some say the state's medical marijuana market will turn out to be much larger than expected, with potentially tens of thousands of patients and an expanded network of dispensaries that generates millions of dollars of tax revenue a year.

Predictions of huge windfalls have been used to sell the legalization of medical marijuana around the country. And critics say there are plenty of costs, too, including oversight and demands on law enforcement.

But, as California's experience shows, the promises of state budget relief can be more than hype alone.

In fact, cash-strapped California cities that host dispensaries are now imposing sales taxes of their own. Berkeley balanced next year's budget with $300,000 in anticipated revenue from a proposed tax on its three dispensaries.

Portland and other Maine cities won't be able to cash in with their own local taxes, however, unless the Legislature changes state law.

Promises of an even bigger revenue stream may help take California to the next level of legalized marijuana.

Advocates say decriminalizing recreational use of marijuana and adding a new $50-per-ounce excise tax -- which state voters could do this fall -- will generate more than $1 billion in tax revenue a year statewide.

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