Legislature(2025 - 2026)BARNES 124
03/03/2025 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB94 | |
| HB113 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 94 | TELECONFERENCED | |
| += | HB 113 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB 94-MARIJUANA: TAX/REGISTRATION; INCOME TAX
[Contains mention of SB 73.]
3:16:25 PM
CO-CHAIR FIELDS announced that the first order of business would
be HOUSE BILL NO. 94, "An Act relating to the registration of
marijuana establishments; relating to a tax exemption for
qualified small businesses; relating to marijuana taxes; and
providing for an effective date."
3:17:03 PM
DAVID GOFF, Staff, Representative Frank Tomaszewski, Alaska
State Legislature, on behalf of Representative Tomaszewski,
began by giving the prepared sponsor statement for HB 94
[included in the committee packet], which read as follows
[original punctuation provided]:
Alaska's current marijuana excise tax places an undue
burden on an industry that is overwhelmingly comprised
of small, Alaskan-owned businesses. Alaska's marijuana
industry is currently taxed at $50 per ounce at the
wholesale level. This represents the highest effective
tax on marijuana in the country. In 2022, the Governor
convened the Advisory Task Force on Recreational
Marijuana. The first recommendation from the task
force was an adjustment to the marijuana tax
structure.
Currently, the $50 tax rate applies only to the
highest-grade product. The statute applies lower rates
to lower grades of the plant: immature or abnormal bud
is taxed at $25, and all other parts are taxed at $15.
There is currently no enforcement mechanism to
determine which tax rate applies to different parts of
the plant. As a result, marijuana tax revenue peaked
at nearly $30 million in 2022, but has declined since
then. House Bill 94 eliminates the multiple tiers of
taxation and establishes a single tax rate at $12 per
ounce. It also amends marijuana registration from
annual to biennial, aligning the marijuana industry
with the standard for other business.
Finally, House Bill 94 re-establishes the Alaska Small
Business C-Corporation Income Tax Exemption that
expired in 2023. This tax exemption applies to all
small businesses with less than $50 million in gross
assets. Alaska does not tax small business that are
organized as S-corporations or limited liability
companies (LLC's). Some small businesses are organized
as C-corporations and must pay Alaska's 9.4% corporate
income tax (CIT), which currently has the fourth
highest tax rate and the highest graduation of rates
in the nation. According to the Department of Revenue,
approximately 35 corporations claimed exemption with
their 2022 tax return.
HB 94 would reinstate this exemption permanently,
allowing for future business development in the state.
Alaska should be encouraging small business
development, rather than taxing current and future
businesses at the highest rate levied on large
corporations in the country.
MR. GOFF continued on to the sectional analysis of HB 94
[included in the committee packet], which read as follows
[original punctuation provided]:
Sections 1-6
Amends AS 17.38.200(d), AS 17.38.210(e), AS
17.38.210(f), AS 17.38.210(h), AS 17.38.210(j), AS
17.38.320 to change renewal of application for
marijuana establishment registrations from annual to
biennial.
Section 7
Adds to AS 43.20.012(a) (corporate income tax
exemptions) by reinstating an exemption for Alaska
corporations that are qualified small businesses under
26 U.S.C. 1202(e), as that subsection read on January
1, 2012.
Section 8
Adds new subsections to AS 43.20.012 (corporate income
tax exemptions) that a corporation qualifies for the
small business exemption shall be determined on the
first day of the tax year, and that all corporations
that are members of the same parent-subsidiary
controlled group shall be treated as one corporation.
Section 9
Amends AS 43.61.010(a) (marijuana tax) to lower the
excise tax rate from $50 per ounce to $12 per ounce.
Section 10
Conforms AS 43.61.010(b) to the new tax rate.
Section 11
Adds a new subsection AS 43.61.010 to the marijuana
tax statute that the tax is imposed on all marijuana
sales, regardless of the status of the seller's
registration.
Section 12
Conforms AS 43.61.020(b) to reflect a single tax rate.
Section 13
Amends AS 43.61.300(a) (administration and enforcement
of the marijuana tax) to make a person who is
delinquent in the payment of the marijuana tax is
subject to civil penalties under AS 43.05.220 (civil
penalties for late or deficient tax payment).
Section 14
Adds to uncodified law applicability of the small
business exemption in sections 7 and 8 for the tax
year beginning on or after the effective date of this
act.
Section 15
Provides and effective date of July 1, 2025.
3:22:56 PM
CO-CHAIR FIELDS stated that the committee would move to invited
testimony on HB 94.
3:23:11 PM
SAM HACHEY, Co-Owner, Tanana Herb Company, stated that he is a
part of the Governor's Advisory Taskforce Board. He stated
that, without change, there would be no revenue in tax
collection from marijuana products. He said that the Department
of Revenue (DOR) has been studying trends in products sold in
the [marijuana] industry since its legalization in 2016. He
reported that there has been a shift from the sale of flower to
trim, noting that 60-70 percent of the taxes currently collected
are from trim sales. He listed other products that have
increased in sales: vape products, edibles, concentrates, and
joints. He stated that the taxes collected from flower were
decreasing as other products became more popular.
MR. HACHEY asserted that HB 94 would address the biannual
renewal [of licenses], which, he asserted, are very costly. He
maintained that the C-corporation status exemption is very
important. He noted that DOR is having difficulty with
enforcement. He concluded by stating that HB 94 is proactive
and would address the evolving [marijuana] industry.
3:26:27 PM
LACY WILCOX, Vice President, Alaska Marijuana Industry
Association (AMIA), began her invited testimony by stating that
AMIA is in full support of HB 94. In Alaska, she stated, local
entrepreneurs had built the cannabis industry. She asserted
that the current [marijuana] tax structure was oppressive,
forcing job cuts and driving users towards an illicit market.
She reported that the current flat excise tax of $50 an ounce
was created when cannabis prices were presumed to be high. She
stated that, as the market has evolved, wholesale prices "have
plummeted more than 50 percent, making [the] tax unsustainable"
and burdensome for legal businesses. In many cases, she
reported that the tax burden exceeds 30 percent of wholesale
revenue, which is, she opined, much higher than any other
industry. She asserted that HB 94 would provide a simple and
immediate fix by lowering the excise tax to $12 an ounce. She
asserted that HB 94 would allow businesses to reinvest money
saved under the provisions of HB 94, hire more workers, and
compete with unregulated [marijuana] markets.
MS. WILCOX explained that the marijuana industry already faces
significant financial challenges beyond taxation, such as the
federal prohibition barring cannabis operators from using
traditional banking and loans. Additionally, she cited Internal
Revenue Services (IRS) code 280e, which prevents legal cannabis
businesses from deducting normal operating expenses. She stated
that these issues, combined with a "high cost of compliance,"
put legal operators at a disadvantage when competing with black
market sellers. Additionally, she noted that HB 94 also would
reinstate the C-corporation exemption for qualified small
businesses, ensuring that they can continue their operations.
MS. WILCOX noted that the legal cannabis industry has
significantly contributed to Alaska's economy, reporting that
since 2017, legal operators had generated tens of millions of
dollars in tax revenue, with a peak of $28 million in 2023. She
asserted that the industry is plateauing under the current tax
structure and therein lies a choice either to "support a legal,
tax-paying, job-creating industry or ... continue pushing
businesses towards failure and consumers towards unregulated
alternatives." She argued that HB 94 was not a handout; rather,
it would create a tax structure that would be "fair,
sustainable, and competitive." She asserted that, without
meaningful tax reform, Alaska risks losing [marijuana]
businesses and their contributions to the state. Ms. Wilcox
urged the committee to pass the proposed bill, concluding that
HB 94 would protect jobs, strengthen Alaska's economy, and
ensure the survival of the [marijuana] industry.
3:30:56 PM
BAILEY STUART, Chair, Marijuana Control Board (MCB), stated that
MCB supports both HB 94 and [its companion bill] SB 73. She
asserted that HB 94 would provide "much-needed tax relief" for
both the [marijuana] industry and the [Tax] Division.
Additionally, she noted that the extension of the C-corporation
exemption would provide relief for all small businesses in
Alaska, not only marijuana retailers. She reported that MCB
heard compelling public testimony in February [2025] regarding
the severity of the "punitive tax." She asserted that the most
pressing issue in Alaska was the operation of illegal markets
without state oversight, which, she stated, actively undermines
the [marijuana] industry. Additionally, she stated that MCB
heard public testimony regarding the dangers of the "gray
market" - illicit substances in hemp products entering Alaska
despite regulatory changes by the Division of Agriculture
[within the Department of Natural Resources]. She concluded by
stating that illegal operations are a complex issue that would
take time to completely resolve, and that immediate tax relief
would be "critical in the interim." She asserted that legal
actors want to pay taxes and contribute to Alaska's economy.
3:33:29 PM
REPRESENTATIVE SADDLER echoed the invited testifier's sentiment
that failure to reduce the [marijuana] tax would drive business
to illicit markets. He queried the impact of the illegal market
on consumers in Alaska.
3:34:03 PM
MR. HACHEY replied that one could track tax revenue and products
currently sold through legal pathways and claimed that all of
the current consumers would continue to consume marijuana
products, regardless of whether said products were acquired
legally or not. He cited that, when marijuana was legalized in
2016, there was an increase of consumers for three years before
a plateau. He opined that approximately 20-30 percent of
recreational consumers were likely already participating in the
illicit market. He further opined that everybody could
potentially engage in the illicit market, especially if
[marijuana] businesses are forced to close.
3:35:44 PM
MS. STUART encouraged committee members to review the annual
drug report compiled by the Alaska Division of State Troopers
[within the Department of Public Safety]. She stated that
troopers were not prosecuting marijuana facilities but found
their reports highlighting "scary" trends regarding fentanyl and
methamphetamines. She cited one incident in 2024 where state
troopers found 316 pounds of [illicit] marijuana and noted that
the numbers are significantly higher now than they were prior to
the legalization of marijuana.
3:36:48 PM
REPRESENTATIVE COULOMBE stated that the marijuana industry
strongly indicated the need for a retail tax. She noted that
the industry was now supporting a wholesale tax and queried the
reason for the revision.
MS. STUART responded that there appeared to be a lot of
contention towards the introduction of a statewide sales tax;
thus, the marijuana industry opted for a different approach in
hopes of providing immediate tax relief. She explained that
implementing a statewide tax could have taken upwards of two
years.
REPRESENTATIVE COULOMBE noted there would be significant
reduction of licensing fees in the proposed legislation. She
questioned the reason for the reduction of licensing fees. She
additionally asked whether the reduction of licensing fees would
be sufficient without the tax reform.
MS. STUART responded that currently the [marijuana] industry is
$2,000 over the statutory limit. She stated that the statute
sets the maximum annual registration fee at $5,000. She
explained that the MCB had to pay back the general fund $1.8
million dollars for the implementation of MCB. She further
explained that the prior board raised the renewal fees to cover
this payback and now that it was paid back, it was time to lower
the licensing fees and bring them back into alignment with
statute.
3:40:12 PM
REPRESENTATIVE CARRICK thanked the bill sponsor. She stated
that the marijuana tax is the only revenue source for the
Marijuana Education Treatment Fund and the Recidivism Reduction
Fund. She asked what would be done to recoup the lost revenue
for the programs.
3:40:50 PM
REPRESENTATIVE FRANK TOMASZEWSKI, Alaska State Legislature,
emphasized the importance of providing immediate relief to the
[marijuana] industry. He offered his belief that there are a
few taxes that cover those programs mentioned by Representative
Carrick. He asserted that Alaska would lose all funding for the
Marijuana Education Treatment Fund and the Recidivism Reduction
Fund should it start importing other states' marijuana products.
He suggested adjusting applicable grants. He repeated that,
without action, the marijuana industry would collapse.
3:42:48 PM
REPRESENTATIVE CARRICK expressed a desire for evidence-based
policy. She stated that the Governor's Advisory Taskforce Board
recommended a 3 percent sales tax rate. She queried the reason
for not following the recommendation from the taskforce. She
noted that a previous iteration of HB 94 proposed a 6 percent
[statewide] sales tax.
3:43:54 PM
REPRESENTATIVE TOMASZEWSKI echoed Ms. Stuart regarding the
opposition drawn when attempting to come to an agreement on a
statewide tax. He voiced concern that if he were to entertain a
statewide sales tax, the proposed bill would die. He shared his
desire to provide immediate relief to the [marijuana] industry.
He stated that it is difficult to get policies like statewide
sales tax through the legislative process.
3:45:25 PM
REPRESENTATIVE COULOMBE stated that it was clear the prior year
that the marijuana industry was struggling. She asked for the
reasoning behind the $12 an ounce.
3:46:00 PM
MR. GOFF responded that stage one of the Taskforce
recommendation was a reduction of the current excise tax on
cultivators to 25 percent of the current rate, which would be
approximately $12 an ounce. Further, he explained that stage
two of the Taskforce was a recommendation to implement a
statewide sales tax.
3:46:46 PM
REPRESENTATIVE SADDLER queried whether the decrease in excise
tax would also lower retail prices on cannabis products and
increase consumption.
3:47:31 PM
MR. HACHEY speculated that the industry would see an overall
increase in products sold. He offered his belief that a
reduction in the excise tax would foster more commerce and put
more affordable products out on the market. He emphasized that
the proposed reduction was a small percentage. He stated that
cannabis prices have remained relatively stable over the last
few decades.
MR. HACHEY pointed out the budget for state operating and excise
tax was approximately $11-12 billion, and the proposed
legislation would see an estimated reduction in revenue by a
couple million.
3:49:18 PM
REPRESENTATIVE SADDLER asked for clarification that if tax was
reduced, [marijuana] consumption and sales would increase.
MR. HACHEY confirmed this was correct, in his opinion.
3:49:43 PM
MS. STUART offered that HB 94 would additionally incentivize
consumers to purchase legal products that have been tested.
3:50:06 PM
REPRESENTATIVE CARRICK noted that HB 94 includes small business
tax exemptions, and that HB 113 [heard subsequently in the
meeting by the committee] would provide for the same language.
She queried the reason for including both provisions in one bill
and asked whether there was concern over a single-subject issue.
She further queried how marijuana taxation language might relate
to the small business tax exemption language.
3:50:48 PM
REPRESENTATIVE TOMASZEWSKI opined that HB 94 was one bill with
"two tax-related issues" that could be considered the same
general principle. He noted that a marijuana business could
theoretically qualify for the small business exemption
provision.
3:51:48 PM
REPRESENTATIVE SADDLER echoed previous speakers on the desire
for immediate tax relief. He asked the industry's position on
the imposition of a sales tax. He further asked, should HB 94
go into effect, whether a statewide sales tax was the intended
next step.
3:52:45 PM
MS. WILCOX replied that the policy of retail tax is generally
supported by most of the industry. She clarified that AMIA was
not denouncing that policy. She admitted that AMIA was fearful
that the complexities of implementing a sales tax model, and
lack of consensus among legislators would cause immediate relief
to fail were it to be lumped together in legislation.
[HB 94 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB0094A.pdf |
HL&C 3/3/2025 3:15:00 PM |
HB 94 |
| HB 94 Sponsor Statement.pdf |
HL&C 3/3/2025 3:15:00 PM |
HB 94 |
| HB 94 Sectional Analysis.pdf |
HL&C 3/3/2025 3:15:00 PM |
HB 94 |
| HB 94 Supporting Document - Federal small business definition.pdf |
HL&C 3/3/2025 3:15:00 PM |
HB 94 |
| HB 94 Supporting Document Task Force on Marijuana.pdf |
HL&C 3/3/2025 3:15:00 PM |
HB 94 |
| HB094-DOC-CRC-3-2-25.pdf |
HL&C 3/3/2025 3:15:00 PM |
HB 94 |
| HB094-DOH-BHTRG-02-28-25.pdf |
HL&C 3/3/2025 3:15:00 PM |
HB 94 |
| HB094-DOH-BHA-02-28-25.pdf |
HL&C 3/3/2025 3:15:00 PM |
HB 94 |
| HB094-DOH-CDPHP-02-28-25.pdf |
HL&C 3/3/2025 3:15:00 PM |
HB 94 |
| HB094-DOR-TAX-2-28-25.pdf |
HL&C 3/3/2025 3:15:00 PM |
HB 94 |
| HB 94 Support LetterTomaszewski_Final.pdf |
HL&C 3/3/2025 3:15:00 PM |
HB 94 |