Gov Bullock Proposes 6 Percent Tax On Medical Marijuana

Dec 13, 2016

A new tax on medical marijuana proposed by Governor Steve Bullock would add an estimated million plus dollars a year to government bank accounts. That’s almost 3 times more than the governor’s office says will eventually be needed to support the state’s medical marijuana reform.

"The medical marijuana program in Montana might go from attempts to squash it, to attempts to milk it in a matter of a month," says Kate Cholewa, with the Montana Cannabis Industry Association.

The 6 percent tax was part of Governor Bullock’s proposed biennial budget, released in November. That budget would increase overall state spending by just over 1 percent over the next two years. This in the face of a decline in state revenue in the last fiscal year, due in part to decreased sales of coal, oil and gas.

Lawmakers will vote on the proposed medical marijuana tax, and the rest of the governor’s budget, in the legislative session that starts next month.

When Governor Bullock announced the proposed tax, his staff said it was necessary for funding the medical marijuana reform approved by voters on election day.

"Fifty-seven percent of Montanans said medical marijuana will be legal within our state," says Dan Villa, the governor's budget director.

"It’s the government's job to listen to that will and to make the system work," Villa says. "What this proposal is doing is making sure that we have the resources necessary to implement the costs, both in the short and the long term."

The governor’s tax proposal would bring in an estimated $2.6 million over the next two years.

Villa estimates that over that same period, running the new medical marijuana program will cost about $1 million.

According to a statement from the governor’s office, any marijuana tax money left over would be fair game for lawmakers to use for other purposes. 

Medical marijuana sign.
Credit Flickr user Laurie Avocado (CC-BY-2)

While there is an existing medical marijuana revenue account, Villa says the new tax dollars associated with the program won’t end up there:

"It goes to the state general fund. There's actually costs built in to accommodate what we are expecting to be a rejuvenated industry, after the years of question marks that have been around the prescription drug; I think now everybody can project that there will be increased use, increased utilization, so that the consumption tax will help the state accommodate that additional cost, as opposed to having income tax, or property tax or some other revenue stream make up for that." 

Not all states with legal medical marijuana tax it.

But, Karmen Hanson, a cannabis policy analyst with the National Conference of State Legislatures says a 6 percent tax proposal is in line with what other states have done:

"Yes, it’s something that we’ve seen in other states," Hanson says. "Generally in states that have medical marijuana programs, it is taxed at the typical sales tax level if the state has a common sales tax, or there might be a special tax for medical marijuana related products, somewhere in the 5 percent range."

Hanson says when states tax medical marijuana, that money is largely put back into the state's medical marijuana programs. She says sometimes if there is extra money it goes into a state's general fund.

Hanson says when a state government taxes medical marijuana, some patients groups say they want cannabis based products treated like other medical products that aren't taxed.

Medical marijuana is not approved by the Federal Food and Drug Administration so it can’t be covered by a patent’s insurance.

Here’s Kate Cholewa with the Montana Cannabis Industry Association:

"On one hand we have to recognize the philosophical issue that we do not tax medications here in Montana."

But, she says taxing medical marijuana could help legitimize it, embedding it in the system and revenue streams of government.

Montana Cannabis Industry Association’s Kate Cholewa announces the medical marijuana ballot initiative campaign at the state capitol, April 19, 2016.
Credit Corin Cates-Carney

For patients and an industry that’s had little stability since medical marijuana was first legalized over a decade ago, Cholewa says a state tax might help protect the program in the future.

She says the most important thing the tax can do is fully fund the needs of the state’s new medical marijuana program:

"And I suspect that if there's more money than is needed to do that in the fund, that there’s probably less issue with that being rolled into the general fund," Cholewa says. "But overall I think just like any other issue and any other program, medical marijuana wouldn’t want to become a funding source for all things in government, where the fees for patients and providers kept going up, up, up, up in order to fund things unrelated to the program."

Cholewa noted that Bullock’s tax proposal, like the rest of his budget, will likely change as Republican lawmakers shift spending priorities in the upcoming Montana legislative session, which starts January 2.

Correction 12/13/16: The original lede contained a rounding error. It was corrected to clarify that the proposed tax would bring in almost 3 times more than the governor’s office says will eventually be needed to support the state’s medical marijuana reform. We regret the error.