Medical dispensaries see recreational market as inevitability

Aug. 21—Medical marijuana dispensary owners in Norman say a legal market is not a matter of if but how — and say higher taxes are the chief concern for viability.

If it gets on the ballot, State Question 820 would legalize, tax and regulate recreational marijuana for adults 21 years of age and older.

Over 100 boxes containing more than 160,000 signatures were submitted to the Secretary of State's office on July 5. Oklahomans for Sensible Marijuana Laws submitted around 70,000 more signatures than the 94,910 required to send the measure to voters, according to the Associated Press.

As Oklahomans await the validity of the signatures, Norman dispensary owners are already anticipating what a recreational market will look like. Some expect an evolution similar to what was seen on the west coast and in Colorado.

Regulating, taxing legal marijuana

If put to a vote and approved, a 15% excise tax would be applied to all purchases. The Oklahoma Medical Marijuana Authority, the regulatory agency that oversees the state's medical program, would be responsible or marijuana business licensing and regulations, according to Ballotpedia.

Oklahoma's medical program would continue, with card holders only subjected to the 7% medical tax.

It would legalize the possession of up to one ounce, eight grams of concentrates and the same amount of marijuana-infused products.

Tax revenue from recreational marijuana sales would be distributed by appropriating 30% to the general fund, 30% toward grants to public school programs to support student retention, enrichment programs and substance abuse prevention programs. Twenty percent would go toward government agencies and nonprofit organizations to fund drug addiction treatment and overdose prevention programs.

The state judicial revolving fund and municipalities where the marijuana was purchased would both receive 10%.

The passage of the question would allow for Oklahomans to seek re-sentencing for previous marijuana-related sentences and convictions.

If Oklahoma becomes recreational, it would follow 19 other states and D.C., including Colorado, where medical and recreational programs co-exist.

Colorado levies a 15% excise tax and a 15% retail sales tax on recreational marijuana, while medical is only subject to the general state sales tax of 2.9%. Local jurisdictions can also apply their own excise tax and sales tax for retail marijuana.

In calendar years 2015 through 2021, Colorado saw an increase in annual recreational tax revenue from $130 million to nearly $423.5 million, though Shannon Gray, communications specialist for Colorado's Marijuana Enforcement Division, said as of July, 2022 is on track to break that growth trend.

Colorado businesses can hold both a retail and medical license if the license type exists for both medical and retail, Gray said. She noted the research and development license is only available under medical, and hospitality establishments only available as a retail license.

"Retail and medical businesses may be commonly located, meaning that the business sells both medical and retail marijuana, though each has its own closed loop systems," Gray said. "In this case, a medical business can only sell to individuals 21 years of age or older."

On the other hand, Oklahoma residents can apply for a medical card at 18 years old, and there are no pre-qualifying conditions.

Travis Moore and Devon Rawles are two of three partners in Kush Nitro Club, 541 S. University Ave. Both Moore and Rawles saw the cannabis market evolve from medical to recreational before moving to Oklahoma and eventually opening their medical dispensary on Campus Corner.

Oregon, where Moore and Rawles gained industry experience, passed Measure 91 in Nov. 2014 with 56% of the vote. It allows adults 21 and older to have up to eight ounces of marijuana.

Both Moore and Rawles anticipate Oklahomans to pass State Question 820, though Oregon's recreational possession limit for cannabis exceeds Oklahoma's proposed max by six ounces.

Dispensaries assess positives, negatives of legal cannabis

Norman dispensaries vary in their expectations for the future of Oklahoma's cannabis ecosystem with the addition of recreational, mostly regarding the impact of higher taxation.

Tradecraft Farms, a company that began in southern California, has four locations in the Oklahoma City metro, including one in Norman on Lindsey Street. The brand's co-founder Brent Walker has been involved in cultivation for 14 years and has seen the transformation of his native state's marijuana market since voters passed Proposition 215 in 1996, becoming the first state to legalize medical use. California legalized recreational cannabis 20 years later, which went into effect in 2018.

Walker said the black market in California has seemingly overwhelmed the legal cannabis market.

There are 866 licensed dispensaries in California, according to CalMatters, but Walker believes the number would be larger if not for the tax rate.

"There's a purge happening in California right now," Walker said. "(Store owners) are going out of business, or they are selling their licensed facility and going back to the black market."

After adding up the 15% excise tax along with sales and cultivation taxes, Walker said he pays around $60,000 a month.

"If you include all the local and state and everything it's close to a 40% (rate)," Walker said.

Politico reports California's regulations catalyze a near $8 billion illegal market, twice the volume of legal sales in legal sales.

Walker hopes Oklahoma marijuana taxes would be limited to 15% excise and local taxes, and expressed caution about their effect on wholesale.

"When it goes to 15%, and then you have other taxes put on top of that, you're gonna just put people out of business — that's what's happening In California right now," Walker said.

Walker said a positive of legal marijuana in California and other recreational states is stores — particularly those in close proximity to illegal states — receive sales boosts as residents travel across the border to purchase cannabis.

"It's going to bring a lot of people in from bordering states," Walker said. "I might be selling a couple shops and opening one down by the (Oklahoma and Texas) border, which probably a lot of people are doing right now."

Moore and Rawles say overall, a legal market would help their business as long as regulation doesn't become prohibitive. They intend to operate both medically and recreationally, if and when the opportunity arises.

Jerry Flowers, owner of UWD, 1304 Lindsey Plaza Drive, said Oklahoma is essentially a recreational state already considering no medical condition is required to qualify for a patient card.

"For recreational, every $100 you spend, you're going to spend $8 more in taxes than if you had your medical card, which only costs $100 every two years," Flowers said.

Flowers said the main beneficiaries of a legal market in Oklahoma would be the state, and to a lesser degree, growers.

"Growers would have an additional outlet to move some of their products to keep prices more stable," Flowers said.

Jeff Elkins covers business, living and community stories for The Transcript. Reach him at jelkins@normantranscript.com or @JeffElkins12 on Twitter.