WA House RSG - Committee Meeting
(January 24, 2023) - HB 1453 - Public Hearing

Unanimously supportive testimony on a bill to remove the cannabis excise tax for medical patients registered with the state called attention to problems around taxing medicine.

Here are some observations from the Tuesday January 24th Washington State House Regulated Substances and Gaming Committee (WA House RSG) Committee Meeting.

My top 3 takeaways:

• Committee Counsel Peter Clodfelter provided an overview of HB 1453, “Providing a tax exemption for medical cannabis patients” (audio - 2m, video).
  • At publication time, medical cannabis patients could be exempted from paying sales and use tax on medically compliant products if they register with a Washington State Department of Health (DOH) database, but they still have to pay a cannabis excise tax.
    • In 2021, a review of established tax preferences by the Washington State Citizen Commission for Performance Measurement of Tax Preferences had determined the sales and use tax exemption should be maintained, but merited further study.
    • An earlier legislative attempt was made in 2021 when Senator Karen Keiser sponsored SB 5004, which passed through her chamber but not the WA House.
  • At the hearing, Clodfelter provided a briefing from the bill analysis, which laid out how the bill “Provides a tax exemption from the 37 percent cannabis excise tax for qualifying patients and designated providers with a recognition card on purchases of cannabis products that are labeled as Department of Health (DOH) compliant product and tested in accordance with the DOH's rules.” He emphasized the “bill would provide that exemption” only for “purchases or products that have gone through this extra layer of Department of Health quality assurance screening.”
    • With pesticide testing rule chances were expanded to all cannabis products was adopted in June 2022, making heavy metals testing the only area medically compliant cannabis was more stringently tested than adult-use items.
  • A fiscal note on the bill showed minor costs of $49,142 per biennium for the Washington State Liquor and Cannabis Board (WSLCB) to implement the proposal.
    • At a January 25th WSLCB meeting, Jim MacRae took issue with staff’s sales estimates, calling them “ridiculously low” and faulting the data in the Cannabis Central Reporting System (CCRS).

• Testimony was unanimously in favor, as patients, industry members, and a representative of the Washington State Liquor and Cannabis Board (WSLCB) backed the move as beneficial for patients.
  • 82 individuals registered positions in support of the bill (testifying, not testifying).
  • The bill sponsor, Committee Co-Chair Sharon Wylie, stated cannabis was “serious medicine for some people for very serious ailments.” Merging the medical and recreational markets in 2016 was intended to create a “separation between people who pretended to need it medically” but, “it didn't quite work out the way we planned.” Medical providers left the patient market to become “recreational providers because there was a perception that it was going to be very profitable.” Removing the excise tax for patients was part of a broader review on the tenth anniversary since voters passed Initiative 502, and Wylie considered her bill ”one small way that we can help medical patients” (audio - 3m, video)
  • Representatives of both cannabis industry groups and individual businesses lent their support to the bill, feeling “true medical patients were left out" and the market for compliant cannabis items was “on the verge of collapsing."
    • Burl Bryson, The Cannabis Alliance Executive Director (audio - 2m, video)
    • Ezra Eickmeyer, Producers Northwest Founder (audio - 2m, video)
    • Matthew Friedlander, Skagit Organics Founder and Chief Operating Officer (audio - 2m, video)
    • Donald Guzman, Budtender and Cannabis Alliance member (audio - 2m, video)
    • Lukas Hunter, Harmony Farms Director of Compliance (audio - 1m, video)
    • Micah Sherman, Washington Sun and Craft Growers Association (WSCA) Board Member (audio - 1m, video)
    • Ranking Minority Member Kelly Chambers about the average sales of compliant products (audio - <1m, video), and their cannabinoid concentrations (audio - 2m, video).
  • Several patient advocates spoke about the challenges people like them faced, arguing medically compliant items were “very out of reach and unaffordable to most people right now,” use of a sin tax on medicine was akin to being treated as though they had a “sin diagnosis," and compliant items composed a small fraction of total cannabis sales in the state.
    • Dawn Darington (audio - 3m, video)
    • Steven Field (audio - 3m, video)
    • Jay Jones (audio - 2m, video)
    • Jim MacRae (audio - 3m, video, written testimony)
    • Michael Schermerhorn (audio - 3m, video)
    • Representative Jim Walsh asked whether the tax structure could “drive people to illicit markets" (audio - 1m, video).
    • Chambers then asked how medical cannabis related to other courses of treatment for cancer patients (audio - 1m, video).
    • Assistant Ranking Minority Member Eric Robertson wanted to know about youth pretending to have qualifying conditions (audio - 2m, video).
  • Additionally, WSLCB Director of Policy and External Affairs Justin Nordhorn said the agency supported the legislation since the “interest and intent to 5052 didn't really pan out, we don't see that many people in the registry.” Backing “other incentives for production” like lower taxes made sense, he said, and HB 1453 could potentially motivate more patient engagement with the system. Nordhorn added that agency officials had heard from a researcher that among patients, “55% said they could not afford the products…and so when we're looking at trying to support the patients in Washington state, we at the LCB believe that it's important to take a look at these gaps” (audio - 2m, video).
    • Robertson asked Nordhorn to explain what processes would stop someone from obtaining a patient registration under false pretenses (audio - 2m, video).
    • Chambers inquired about the medical diagnoses that enabled someone to qualify as a patient (audio - 1m, video).
    • Walsh asked about the difference between compliant and non-compliant cannabis items (audio - 1m, video).

• One person opposed HB 1453, but offered no testimony on their position.
  • Thomas Osmundson registered as ‘con’ on the bill without additional comments or affiliations.

Information Set