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Published on Friday, November 9, 2012

I-502: Impacts of the marijuana initiative

Initiative 502 legalizes the possession, use, and sale of marijuana in the state of Washington. On December 6, 2012, persons over 21 will be able to possess certain amounts of marijuana. The initiative will set in motion many discussions on sales, retail licenses, and taxes ­– all of which will be regulated by the Liquor Control Board (LCB). Though still an illegal substance in the eyes of federal law, this has clearly started a discussion and may bring many changes and challenges to our cities.

The LCB came out with an official statement that they will progress with the will of the voters. They LCB will establish rules regarding licensing and sales no later than December 1, 2013.

After obtaining the appropriate licenses, stores will be allowed to sell to an individual any combination of the following: one ounce of useable marijuana, 16 ounces of marijuana-infused product in solid form, or 72 ounces of marijuana-infused product in liquid form. Stores may not allow on-premises consumption. In fact, it will be illegal to consume or open these products in public view.

The maximum number of retailers per county, the maximum amount of marijuana a retailer and producer may have on premises, how and when marijuana could be transported, and product labeling requirements, all become responsibilities of the LCB. Rules about security requirements, employee training and supervision, and locations and hours of retail operations are also among the LCB’s tasks.

The initiative provides for a 25% excise tax at each transaction point (producer to processor, processor to retailer, and retailer to consumer). The taxes will be placed in a dedicated marijuana fund. After quarterly distributions of $1.25 million for LCB administration and $180,000 to other specific programs, the taxes will be distributed as follows:

  • 50% to the state’s Basic Health Plan
  • 19.07% to the state general fund
  • 15% to the Department of Social & Health Services for Behavioral Health & Recovery
  • 10% to the Department of Health for marijuana education & public health
  • 5% to Community Health Centers
  • 1% to the UW and WSU for research on the short- and long-term effects of marijuana use
  • .03% to the Building Bridges Programs

Cities will not receive any portion of the excise tax, but will receive local sales and B&O taxes. The Washington State Office of Financial Management (OFM) estimates that locals could receive as much as $120 million in these taxes over five years. However, there has been some concern that OFM overestimated how much marijuana will actually be consumed from these state-licensed stores. Cities will not see any revenue from marijuana sales until at least December 2013.

OFM also estimates cities will experience increased costs from additional driving under the influence cases but decreased costs from fewer marijuana arrests, prosecutions, and incarcerations.

For more information, check out our web page on initiatives.

Want to learn more?

AWC and the Washington State Association of Counties are partnering to provide a free webinar for city and county officials and employees on November 27. This webinar will be an opportunity to discuss the impacts, how marijuana will be regulated, the tax structure, and what it could mean for your community. Click here to register.