WA House FIN - Committee Meeting
(March 16, 2021)

Tuesday March 16, 2021 1:30 PM - 3:20 PM Observed
Washington State House of Representatives Logo

The Washington State House Finance Committee (WA House FIN) considers issues relating to state and local revenues, such as increases or decreases in taxes, exemptions from taxes, and changes in the administration of taxes.

Public Hearing

  • SB 5004 - “Providing a tax exemption for medical marijuana patients.”
https://app.leg.wa.gov/committeeschedules/Home/Documents/28826

Observations

Testimony on legislation establishing a limited excise tax exemption for medical cannabis patients registered with the State painted an encouraging picture of potential impacts for patients and the regulated industry.

Here are some observations from the Tuesday March 16th Washington State House Finance Committee (WA House FIN) meeting.

My top 3 takeaways:

  • Staff briefed on the impacts of a bill to remove the 37% excise tax for some cannabis sales to patients who joined the State’s registry, the prime sponsor commenting that her proposal helped avoid “street corner sales."
    • SB 5004 ("Providing a tax exemption for medical marijuana patients") would benefit medical cannabis patients who registered with the Washington State Department of Health (DOH) and purchased compliant products from medically endorsed retailers starting in January 2022 through January 2025. Registered patients had been exempted from paying state and local sales and use tax on qualifying products, but were expected to pay the 37% excise tax on all cannabis products.
    • On January 18th, the Washington State Senate Ways and Means Committee (WA Senate WM) heard the bill before amending and approving the legislation on February 17th. Then, on March 5th, the Washington State Senate (WA Senate) adopted and passed the revised legislation by a vote of 42-7.
    • WA House FIN Fiscal Analyst Rashelle Harris discussed the bill analysis, starting with a history of the use of excise taxation for cannabis and how medical use of cannabis was authorized for patients in the state (audio - 2m, video).
      • Harris said “patients do pay the marijuana excise tax” but if they joined the DOH database and received a recognition card, they were “granted a sales tax exemption” on medically compliant products from retailers with medical endorsements. She explained SB 5004 would also remove the excise tax on “sales of compliant medical marijuana products by a retailer with a medical marijuana endorsement to qualifying patients or designated providers...until January 1st, 2025.” Harris added that the exemption “overall, takes effect, January” of 2022.
      • Beyond sunsetting the tax exemption, Harris noted the bill mandated that the Washington State Joint Legislative Audit and Review Committee (JLARC) “identify any changes in consumer behavior and determine whether the exemption results in an unanticipated decrease in state revenue” and report “findings to the legislature by December 1st, 2024.”
      • Turning to the most recent fiscal note published on March 3rd, she stated that the legislation was projected to “reduce revenues to the dedicated marijuana account (DMA) by an estimated $5,300 in the first biennium and by $5,500 in the second biennium” by the Washington State Liquor and Cannabis Board (WSLCB) and the Washington State Health Care Authority (WA HCA).
        • Also in the fiscal note, JLARC requested $322,800 between fiscal years (FY) 2024 and 2025 to complete the required study.
    • Senator Karen Keiser, primary sponsor, introduced her bill with “a lot of history” stretching back a decade to the Legislature’s 2011 law regulating medical cannabis “and medical marijuana stores started opening up. And that was kind of a wild west time" (audio - 4m, video).
      • She recalled, “about every street corner had a medical marijuana store with all kinds of advertising" and contrasted the adult use market that emerged years later as “a pretty solidly regulated market" that had products “carefully vetted and...accounted for.” Keiser admitted that medical cannabis policymaking “got lost in the shuffle, to be honest.”
      • Keiser told the committee that, as adult use cannabis carried an excise tax, patients “tended to avoid paying the 37% by using what you call the gray market” of dispensaries, whose sales “became a bit...of a loss to the retail market." She explained that dispensaries weren’t “fully regulated and people selling on the gray market, even, you know, out of their own home grows may have used pesticides or other materials that would not be really appropriate for” patients. SB 5004 created greater incentive for patients to go “into the system where they are purchasing Department of Health [compliant] medical marijuana products,” Keiser said, rather than going “back to street corner sales."
      • Deeming the excise tax “quite hefty,” Keiser called for support of her bill since it “ensures that the system remains under some control.”
  • Four speakers testified in support of the legislation, three members of the cannabis industry and a concerned patient.
    • Ezra Eickmeyer, Producers NW (audio - 2m, video)
      • Eickmeyer was in strong support of the bill, saying prior legislative efforts around medical cannabis taxation had fixated on “fear of the general public gaming the system and getting, you know, fraudulent medical marijuana authorizations so that they could get a, a tax break at the retail stores.” He argued that a 2015 law combining the medical and adult use systems featured provisions “to permanently prevent that kind of behavior, I actually helped craft those provisions” which he called “very effective...they have eliminated that concern entirely.”
      • One result, Eickmeyer noted, was that patients who may “need very high levels of cannabis products are being taxed the same as somebody who wants to...use cannabis for whatever reasons,” a practice he believed was “not humane.”  
      • Eickmeyer suggested from his position within the cannabis sector that SB 5004 would “spur a bunch of economic development because it would make it economically viable for our companies to start actually investing in research on next generation medical cannabis products.”
    • Lara Kaminsky, The Cannabis Alliance Government Affairs Liaison (audio - 2m, video)
      • “We have conducted surveys to determine how patients are feeling about the regulated system,” Kaminsky said, and found “patients consistently indicate that half of them are staying out of the regulated market completely.” Follow up questions revealed the primary factors behind avoidance were “cost, the fear of inadequate testing, and the lack of appropriate products in the store.”
      • DOH compliant product was lacking from the retail market, in part, Kaminsky indicated, because compliant items plus the tax were “far out of the range of chronically ill patients who are disproportionately poor, and whose need is generally greater.” In removing the excise tax “only on those highly tested DOH compliant products” to patients with recognition cards, Kaminsky said the bill went “a long way to address the top three reasons patients are not accessing the regulated market.”
      • She also encouraged lawmakers to alter the amendment “sunsetting the exemption after a report by JLARC” staff so that the tax break ended in “June of 2025 rather than January, this is to prevent a gap in the relief to patients should the report be favorable and the exemption made permanent.”
      • Representative Rob Chase asked whether “other prescriptions [were] taxed in Washington State.” Kaminsky replied that “only medical marijuana is taxed, no other medicine is usually taxed” (audio - 1m, video).
    • Danielle Rosellison, Trail Blazin’ Productions Co-Founder/CEO (audio - 2m, video)
      • Rosellison remarked that her Bellingham cannabis farm was one of two in Washington “that certify all of our products as medical.” She asked for passage of SB 5004, saying it was “expensive to grow medical products and it’s expensive to test medical products.” Rosellison said it hadn’t been a great return on investment but she had started “working...with JLARC” staff to provide her perspective for their tax preference study.
      • She predicted that passing the bill into law “will make sure that retailers understand what DOH products are and that more patients and veterans in need will ask for DOH products which then means that more producers and processors will certify their products as medical.”
      • Rosellison testified that the existing waiver of sales tax on medical cannabis sales to patients created a “burden” that resulted in “every retailer I know just gives anybody who says that they’re a patient 10% off” their purchase. This practice led her to feel patients were purchasing “whatever is suggested, which may or may not be in the best interest of the patient,” she said. While many patients had “fixed incomes” they still needed “the best quality products for their health.”
      • ”This is about affordable healthcare," Rosellison argued, and although there wasn’t a “requirement for medical marijuana endorsed stores to have certified medical marijuana,” the bill would further industry understanding and patient access.
        • RCW 69.50.375 states: “(3) To be issued an endorsement, a marijuana retailer must...(b) Carry marijuana concentrates and marijuana-infused products identified by the [Washington State Department of Health (DOH)].” However, Cannabis Observer is under the impression WSLCB doesn’t enforce this statute.
    • Hana Keefe-Guerrero, medical patient (audio - 3m, video)
      • Keefe-Guerrero shared her story about combating “an aggressive and recurrent form of third grade brain cancer” including regular Magnetic Resonance Imaging (MRI) “for the rest of my life, and I’m 29 years old.” She faced regular struggles related to her diagnosis and had been “unable to work due to treatment and its long term resulting effects.” She was reliant on social services and family for “rent and utilities” and maintained a small budget for medical cannabis.
      • Keefe-Guerrero had been put in contact with Simply Mary Jane (SMJ) Consulting and the Advanced Integrative Medical Science Institute (AIMS) by another patient and been able to learn more about the utility of cannabis at “inhibiting the growth of cancerous brain cells.” Additionally, cannabis had helped her manage anxiety, “heavy mood swings, and mental breakdowns,” she said.
      • She testified that she was barely able to afford sufficient medicine, in part by “relying heavily on credit cards to cover the cost.” Keefe-Guerrero emphasized the benefit of cannabis to “improving and extending the quality and longevity of my life” as well as the “huge impact” passing SB 5004 would have on her situation. Chair Noel Frame thanked Keefe-Guerrero for sharing her story.

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