Legislature(2025 - 2026)GRUENBERG 120
03/06/2025 03:15 PM House STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| SB43 | |
| HB91 | |
| HB81 | |
| HB119 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 43 | TELECONFERENCED | |
| += | HB 81 | TELECONFERENCED | |
| += | HB 91 | TELECONFERENCED | |
| *+ | HB 119 | TELECONFERENCED | |
| += | HB 30 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 91-MARIJUANA: TAX/RETAIL STORES/REGISTRATION
[Includes discussion of HB 113]
3:26:09 PM
CHAIR CARRICK announced that the next order of business would be
HOUSE BILL NO. 91, "An Act relating to the lawful operation of
retail marijuana stores; relating to marijuana cultivation;
relating to the registration of marijuana establishments;
relating to marijuana taxes; relating to the duties of the
Department of Revenue; and providing for an effective date."
CHAIR CARRICK, as prime sponsor of HB 91, noted that her staff
had uploaded various documents pertaining to the bill onto the
legislature's Bill Action Status Inquiry System (BASIS) [copies
in the committee file]. These include a list from the
Department of Health (DOH) that includes the grant recipients
that receive money from the recidivism reduction fund (RRF) and
the marijuana education and treatment fund (METF).
Additionally, fiscal modeling was provided to illustrate
projected revenue from a 6 percent sales tax, and this was
created by the House Majority counsel staff following bill
concept discussions during the Thirty-Third Alaska State
Legislature.
3:27:41 PM
REPRESENTATIVE VANCE asked about the current number of growers
and retailers and whether it was the right capacity to sustain a
tax since they were carrying a heavy burden currently. She also
asked how HB 91 came to be.
STUART RELAY, Staff, Representative Ashley Carrick, on behalf of
Representative Carrick, prime sponsor of HB 91, offered his
understanding that the modeling was based off the industry and
the number of members in the industry. It also details the
amount of products sold when the industry was originally created
which was around one year prior. He opined that the information
was still good regarding current tax structure discussions.
CHAIR CARRICK added the Brandon Spanos could speak to potential
revenue from the tax, even if not related to the document.
3:30:30 PM
BRANDON SPANOS, Deputy Director, Tax Division, Department of
Revenue (DOR), to Representative Vance's previous question
focusing on the proposed tax change and the state's capacity and
potential capacity, spoke to the modeling completed by the
Department of Revenue and the modeling provided to the committee
from the last legislative session, from Cody Rice. He said he
did not agree with the fiscal modeling and said there were
differences. He said that DOR presented those differences to
the House Finance Committee last year and would be happy to do
so again. He suggested inviting Dan Stickell to explain those
differences since he had done the department's modeling and had
spoken in depth with Cody Rice to understand the other modeling.
He recollected that there had been around 150 cultivators and
there currently were approximately 130. He said while he
couldn't perfectly recall the numbers, they are published on the
Alcohol & Marijuana Control Office (AMCO) website for public
viewing.
REPRESENTATIVE VANCE said that any information Mr. Spanos could
provide for the committee would be good. She said she was
looking for some broad information regarding switching an excise
tax type to a sales tax type. She remarked that the sales tax
would "hit" the purchasers more. She asked Mr. Spanos whether
he could foresee this type of change when looking at this
modeling.
MR. SPANOS replied that DOR's modeling is based off numbers that
were received from AMCO as far as retail sales year after year
and currently the modeling was being updated, and the spring
forecast was going to come out soon, as well as the fiscal notes
pertaining to marijuana, once released. He said that newer data
from AMCO on the retail and cultivation side was available as
well. He reiterated that information was in the process of
being updated and the department's Economic Research Group (ERG)
was currently occupied with other projects. He noted that the
information comes from AMCO and there was no direct interaction
with industry members.
REPRESENTATIVE VANCE noted that she pulled up a fiscal note that
estimates a reduction of $9.9 million for 2026. She asked what
this number was based on and whether it was AMCO and whether it
was consistent with what AMCO is seeing.
MR. SPANOS responded that he did not believe AMCO had done any
modeling regarding tax changes and DOR's ERG typically do these
models. He said that AMCO provides retail sales data to allow
ERG to complete economic modeling. He said the fiscal year 2026
(FY 26) impact is a combination of moving to the $12.50 an ounce
excise tax and a later change to sales tax. He said 2027 would
be the first year of just the retail sales impact for these
changes.
REPRESENTATIVE VANCE noted that based on the fiscal modeling,
the revenue would continue to go down in later years.
3:36:19 PM
REPRESENTATIVE HOLLAND asked what the speculated change may be
for consumer pricing following the excise tax to sales tax
change. He asked whether it would change and if any consumer-
based data was available that suggests a return in demand. He
said it seems as if the change was "who pays the tax when." He
said that when the consumer gets the wallet out and the price
doesn't change, it may not disincentivize black market purchases
and still maintain a loss in state revenue. He asked who was
testing the demand side of this fiscal modeling and studying
consumer behavior to understand whether demand would change.
CHAIR CARRICK responded that this question could potentially be
for Bailey Stuart with AMCO. She noted that the marijuana
industry has been divided regarding tax structures, even with
bill discussions in the previous legislature. She said that she
has heard similar concerns from industry members but opined that
the excise tax is unequivocally burdensome to cultivators.
3:39:04 PM
BAILEY STUART, Chair, Alcohol & Marijuana Control Office,
responded to Representative Holland that there have not been any
studies done specific to the consumer but there was some
anecdotal evidence that can be determined from the Alaska State
Troopers Annual Drug Report that shows black market growth and
the increase in consumer demand. She said that in 2023 there
were about 180 pounds of marijuana seized whereas last year in
2024 there were about 316 pounds seized. She noted that
cannabis prices per ounce in legitimate businesses can range
from $250 to $450 whereas black market prices are often $100 an
ounce which renders the black market difficult to compete with.
She said there needs to be a reduction in taxation to help the
industry be sustainable. She said that there are very few
unregulated industries in Alaska that pull consumers in the same
fashion. She opined that these industry members want to be
taxpayers, create jobs, and have sustainable businesses but the
current tax structure is making it impossible.
REPRESENTATIVE HOLLAND asked Ms. Stuart what she thought the
price per ounce may be with the current tax structure and
following tax changes.
MS. STUART responded that the current average is about $300 per
ounce in a retail setting and given the proposed tax changes the
price could be reduced between $30 to $40 an ounce. She said
despite this, unregulated and untaxed markets would still be in
competition.
CHAIR CARRICK added that HB 91 would not layer an excise tax and
a sales tax on top of one another and the proposed bill would
phase out current excise taxes to zero dollars per ounce with a
later addition of a sales tax.
REPRESENTATIVE HOLLAND noted that he may not have the most
recent paperwork in front of him. He said what he is reading
proposed that it moves an excise tax to $12.50 an ounce.
MR. RELAY added that the proposed bill would move the excise tax
down from $50 an ounce to $12.50 an ounce effective July 1,
2025. January 1, 2026, the excise tax would be repealed. He
noted that after excise tax changes would be later repealed with
the implementation of a sales tax.
3:44:00 PM
REPRESENTATIVE MCCABE said that what he has heard from industry
affiliates is that the necessary goal is to limit the amount of
money that the black market will make to drive the industry back
into the legal framework. He noted that Ms. Stuart said exactly
what he had heard, which is that frustrated growers are having
to shoulder the burden while the black market harms them. He
said that it is one big pie and the black market has a large
slice that needs to go back into retail.
3:45:18 PM
REPRESENTATIVE HOLLAND said that he was looking for any data
that would suggest that supply and demand would change given the
tax adjustments. He said that it appears that the taxes would
get moved from the producers to the consumers. He said that the
consumer price probably would not change much, and this would
suggest that the black market would still be strong. He raised
concerns about the supply and demand curve.
CHAIR CARRICK responded to Representative Holland that this
sentiment echoes part of what Ms. Stuart was getting at, that
the legislation is trying to address several issues happening in
the marijuana industry. This includes black market demand and
the current volatility of the industry given the current excise
tax structure for cultivators.
REPRESENTATIVE HOLLAND said that he has concerns about adding
more sales taxes into retail markets that already have local
sales taxes. He said that he has a bias for allowing local
jurisdictions to have sales taxes managed to their own accord.
CHAIR CARRICK said that she did not love sales taxes either but
the proposed legislation was about attempting to stabilize the
industry.
3:49:13 PM
REPRESENTATIVE MCCABE said that it seems to him that every
single department in the state has managed to generate a fiscal
note for the bill and everyone was getting on board. He asked
whether there was a better way to solve the payment issue rather
than creating a new office in four districts. He said that at
some point lots of people were flying with cash. He asked if
there was a better way than four new offices priced at $1
million each.
3:50:04 PM
The committee took a brief at-ease at 3:50 p.m.
3:50:54 PM
MR. RELAY proffered that the initial start-up costs per fiscal
note would be about $1 million, after which the cost would be
about $500,000 "for operations." He noted that in Anchorage
there would be no cost since collections already occur there.
3:51:28 PM
REPRESENTATIVE VANCE said that it appears as if the legislation
would create larger profit margins for growers and handing costs
to the retailers. She asked whether AMCO has had a conversation
regarding motivation for the growers to reduce their cost to the
retailers so overall they can support one another. She said the
growers are trying to maintain a profit margin. She said the
needed result is the lower cost so people will choose the safer
retail markets as opposed to the black market. She asked
whether conversations had occurred regarding this; she said that
it could be perceived as unfair.
MR. RELAY responded that this kind of structure of the reduction
of the excise tax and then the implementation of the sale tax
was the recommendation of the Governor's Advisory Taskforce on
Recreational Marijuana, and this is where the original version
of the bill came from. The current bill builds off those
conversations from the previous bill concept.
CHAIR CARRICK added that the current excise tax structure
creates a tight ceiling on how much manufacturers and retailers
can purchase. She said that alleviating this challenge is
significant for all parts of the industry. She said this may be
the reason there was minimal pushback from the retail side of
the industry during the previous legislature's hearing of the
bill concept, during the Thirty-Third Alaska State Legislature.
She stated that the ceiling on cultivated products is partially
due to the excise tax structure and relief would have bigger
downstream impacts. She noted that the recommendation from the
aforementioned taskforce was 3 percent.
3:55:18 PM
REPRESENTATIVE HIMSCHOOT commented that she reached out to a
marijuana industry affiliate in Sitka who has worked at the
statewide level. The affiliate was in strong support of the
proposed bill's shift from an excise to a sales tax. Traveling
to Juneau for deposits would be considerably easier than going
all the way to Anchorage. She said that she supports HB 91.
3:56:26 PM
REPRESENTATIVE HOLLAND noted that HB 113, which is not directly
related to this proposed bill but the primary beneficiary of the
tax reduction bill was marijuana businesses. He said that half
of the qualified small business taxes were from marijuana
retailers. He asked whether, in the analysis of this market
segment, consideration of HB 113 had been given during
discussions on HB 91.
CHAIR CARRICK noted that the current legislation, HB 91, was
modeled after legislation that passed through the committee in
the Thirty-Third Alaska State Legislature, and it was the
current starting point for bill discussions. She said that it
is something that the industry has advocated for and what most
members in the current body had previously supported.
3:58:28 PM
CHAIR CARRICK set an amendment deadline for HB 91 and, after
ascertaining that there were no additional questions, announced
that HB 91 was held over.