Legislature(2025 - 2026)BELTZ 105 (TSBldg)
02/03/2025 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB14 | |
| SB77 | |
| SB73 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 14 | TELECONFERENCED | |
| *+ | SB 73 | TELECONFERENCED | |
| *+ | SB 77 | TELECONFERENCED | |
SB 73-MARIJUANA: TAX/REGISTRATION; INCOME TAX
2:09:18 PM
CHAIR BJORKMAN announced the consideration of SENATE BILL NO. 73
"An Act relating to the registration of marijuana
establishments; relating to tax exemption for qualified small
businesses; relating to marijuana taxes; and providing for an
effective date."
2:09:30 PM
SENATOR MATT CLAMAN, District H, Alaska State Legislature,
Juneau, Alaska, as sponsor of SB 73 he read the following
summary:
[Original punctuation provided.]
In 2022, the Governor convened the Advisory Task Force
on Recreational Marijuana. The first recommendation
from that body was an adjustment to the excise tax on
marijuana.
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. The
voters of Alaska established this tax rate with the
passage of ballot measure 2 in 2014, which legalized
recreational marijuana in Alaska. As the industry has
evolved, however, that tax rate has failed to keep
pace with rising business costs and falling prices.
Today, the industry faces competition against a
thriving unregulated black market and substantial
regulatory and financial headwinds. While most of the
past decade saw significant growth in the industry,
the past few years have shown decline in tax revenue
and an increasing number of small businesses going
under.
Senate Bill 73 lowers the tax rate from $50 per ounce
to $12 per ounce. It simplifies the tax structure into
a single rate. Currently, the Department sets lower
tax rates for certain parts of the plant. While the
tax rate for mature product is $50 per ounce, it is
$25 an ounce for immature product and $12 per ounce
for all other grades. This three-tier structure has
proved difficult and inefficient to enforce. It also
creates an incentive for businesses to classify
product at lower grades with less tax burden.
SB 73 moves from annual registration to biennial
registration, reducing administrative burden and
aligning the marijuana industry with other businesses
in Alaska.
Finally, Senate Bill 73 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. The exemption had previously been in place
since 2012. It applies to all small businesses who
meet the active business requirements both marijuana
establishments and other types of businesses. Many of
these small businesses are set to pay state corporate
income taxes for the calendar year of 2024 for the
first time in a decade. Many of them are facing staff
cuts or even being forced to close their doors because
of this unexpected tax. Re-establishing this exemption
will help countless small businesses across the state.
2:12:39 PM
CARLY DENNIS, Staff, Senator Matt Claman, Alaska State
Legislature, Juneau, Alaska, provided the sectional analysis for
SB 73 as follows:
[Original punctuation provided.]
Senate Bill 73
Sectional Analysis Version G
Sections 1-6
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; Biennial
licensing.
Amends registration requirements from annual to
biennial renewals.
Section 7
AS 43.20.012(a); Alaska small business tax exemption.
Exempts qualified small businesses who meet the
requirements of 26 U.S.C 1202(e) from the Alaka Net
Income Tax Act.
Section 8
AS 43.20.012; Alaska small business tax exemption.
Defines "Alaska corporation," "parent-subsidiary
controlled group," "qualified small business," and
establishes that a corporation shall be determined as
a small business on the first day of the calendar
year.
Section 9
AS 43.61.010(a); Marijuana excise tax.
Lowers the marijuana excise tax rate from $50 per
ounce to $12 per ounce.
Section 10
AS 43.61.010(b); Marijuana excise tax.
Removes the ability of the department to establish a
lower tax rate for certain parts of the marijuana
plant.
Section 11
AS 43.61.010; Marijuana excise tax.
Clarifies that the tax is owed by all sales and
transfers of marijuana, regardless of the status of
their registration.
Section 12
AS 43.61.020(b); Marijuana excise tax.
Conforming change to reflect a single tax rate.
Section 13
AS 43.61.030(a); Marijuana excise tax.
Clarifies that a person who is delinquent in the
payment of the tax is subject to civil penalties under
AS 43.05.220. Distributed by the Office of Senator
Matt Claman 1.29.2025
Section 14
Applicability.
Clarifies that sections 7 and 8 apply to the tax year
of a corporation beginning on or after the effective
date of this act.
Section 15
Effective Date
This Act takes effect July 1, 2025.
2:14:48 PM
SENATOR GRAY-JACKSON asked what the total amount of loss revenue
is if SB 73 is passed.
2:15:03 PM
SENATOR CLAMAN referred to the fiscal note from the Department
of Revenue's Tax Division, which estimates a revenue loss of
about $14 million.
SENATOR GRAY-JACKSON asked if $14 million was the total of all
fiscal notes.
SENATOR CLAMAN answered yes.
2:16:23 PM
BRANDON SPANOS, Deputy Director, Department of Revenue, Juneau,
Alaska, verified fiscal notes for SB 73. He agreed that the
total fiscal note is $14 million.
2:17:01 PM
DAN STICKEL, Chief Economist, Department of Revenue, Juneau,
Alaska, answered a question regarding the fiscal notes for SB
73. He explained that the Department of Revenue's fiscal note
represents the impact on the Tax Division, including changes to
the marijuana tax and the corporate income tax exemption.
2:18:19 PM
SENATOR YUNDT stated many legal businesses have raised concerns
about their revenues falling, which also reduces state revenue,
as more sales shift to the black market. He asked how often DNR
conducts enforcement actions each year, and has it found any
recent violations.
2:19:03 PM
JOE BANKOWSKI, Investigator, Alcohol and Marijuana Control
Office(AMCO), Anchorage, Alaska, Answered questions on SB 73
regarding enforcement. He stated that the primary mandate is
regulating licensed marijuana businesses. He said the secondary
problem is a growing issue of intoxicating hemp, which AMCO is
addressing with the Department of Agriculture. We're working
toward stronger enforcement, but since hemp falls under their
jurisdiction, some responsibility lies with them.
2:20:00 PM
SENATOR DUNBAR stated that he reviewed the task force
recommendations, noting a two-stage tax plan: stage one lowers
the excise tax, and stage two adds a 3 percent retail sales tax
to offset losses. He asked if SB 73 includes only stage one and
whether the risks are making it harder to add the sales tax
later causing reduced revenue.
2:21:09 PM
SENATOR CLAMAN reviewed last session's bill, which focused more
on sales tax than reducing the excise tax. He said while there
was support for a sales tax then, especially from industry
groups, that support has faded. As a result, SB 73 includes only
step one: lowering the excise tax, not the sales tax, which
could be considered in future legislation.
2:22:08 PM
CHAIR BJORKMAN announced invited testimony on SB 73.
2:22:31 PM
LACY WILCOX, Vice President, Alaska Marijuana Industry
Association (AMIA), Anchorage, Alaska, testified by invitation
in support of SB 73. She said the AMIA is aware step one could
pass while step two gets forgotten. She stated that the retail
tax may be better, but support from businesses has faded. She
said with businesses struggling, the AMIA aims to pass something
before more businesses shut down and the conversation ends.
2:23:23 PM
CHAIR BJORKMAN asked what led to the loss of support for a more
balanced approach to SB 73.
2:23:33 PM
MS. WILCOX answered she wasn't sure there was ever full
consensus. She stated that retailers that were already facing
high federal tax burdens and unable to take key write-offs were
less supportive. While cultivators and manufacturers backed it,
many retailers saw it as an added burden, especially with local
taxes reaching up to 16 percent and in rural areas reaching 30
percent tax with a possible compound tax.
2:24:24 PM
SENATOR YUNDT asked if there has been a decline in sales due to
black market products.
2:24:32 PM
MS. WILCOX answered yes.
SENATOR YUNDT asked whether more enforcement would be
appreciated.
MS. WILCOX answered yes.
2:24:55 PM
JANA WELTZIN, Lawyer, JDW Counsel, Anchorage, Alaska, testified
by invitation in support of SB 73. She said the business she
represents dropped from 20 to 5 employees, with owners working
60+ hours unpaid. She stated that the industry is in triage,
partly due to federal law (280E), which blocks normal tax
deductions, hitting retailers hardest and fueling retail tax
resistance. She said a proposed 3 percent sales tax became 7
percent in the Legislature, adding opposition from retailers.
The current fixed tax rate doesn't drop with prices, making
business unsustainable.
2:27:24 PM
MS. WELTZIN continued with her testimony. She said intoxicating
hemp is now a problem. She stated the Agriculture Division
created a hemp program that allowed high THC products in gas
stationsuntaxed, unregulated, and no age checks. With no
enforcement, legal Alaska businesses are hurting and need help
now.
2:29:17 PM
SENATOR DUNBAR stated that he thought importing from out of
state was illegal due to the federal ban on interstate cannabis
commerce and asked if that no longer true.
MS.WELTZIN answered yes, it's federally illegal, but it's
happening anyway. She stated that the latest DPS report shows
zero seizures of marijuana entering the state. It's not a
priority due to issues like fentanyl, but it's hurting local
businesses and costing jobs. She said her producers can't ship
out for the same reason.
SENATOR DUNBAR said the imported products are likely not being
sold through licensed cannabis retailers.
MS. WELTZIN responded correct; they are not being sold through
the licensed cannabis retailers.
SENATOR DUNBAR stated that many of the legislators supported
cannabis legalization expecting it would generate state revenue,
and it has, especially for Anchorage. He emphasized the flat
excise tax per ounce is inefficient. The percentage of retail
value makes more sense. He said on enforcement of products like
Delta-9 gummies, everyone wants action taken, but enforcement
costs money. He stated that legalization has also made it harder
to clearly distinguish legal products from illegal products. He
asked Ms. Weltzin if she thinks retailers might be more open to
a low percent retail tax applied across the industry, if the
revenue helped fund enforcement to crack down on intoxicating
hemp products.
MS. WELTZIN responded first, marijuana licensees pay eight times
more than liquor licenses annually, not every other year. It is
a smaller group paying more. She stated that if enforcement
needs more resources, they should ask. Second, retailers would
welcome real action on intoxicating hemp. She stated that right
now, it's a blame game between agencies. Meanwhile, kids are
getting high on unregulated Delta-9, and no one's stopping it.
She said retailers already face huge federal tax burdens because
they can't deduct basic expenses. It's hard to accept another
tax when nearby shops sell stronger, untaxed products. She
suggested that the industry needs immediate relief first and
then if marijuana businesses are still standing discussions can
take place about a retail tax.
2:33:58 PM
SENATOR YUNDT asked if there already a Memorandums of
Understanding (MOU) that lets the Alcohol and Marijuana Control
Office (AMCO) act and has the industry reached out to discuss
this with them.
2:34:24 PM
MS. WELTZIN responded at nearly every Marijuana Control Board
meeting; we remind them there's an MOU that lets AMCO enforce
against smoke shops. She stated that she had personally bought
products from several shops, never getting carded. She said that
at a board meeting she showed the products she was able to buy.
Reports made by parents are between law enforcement, AMCO and
the Division of Agriculture. She stated no one takes
responsibility.
2:35:34 PM
AARON STIASSNY, Board Member, Alaska Marijuana Industry
Association, Anchorage, Alaska, testified by invitation in
support of SB 73. Alaska legalized marijuana over 10 years ago
but hasn't updated its tax system, unlike other states. The
market is state-specific and facing major challenges. The
expired S Corp small business tax exemption helped drive
investment, including cannabis. Losing it raises costs and hurts
growth in cannabis, where businesses already face high taxes and
can't deduct expenses under 280E. Adding more taxes now will
worsen the situation, especially with unregulated, untaxed hemp
flooding the market. SB 73 would support small businesses,
create jobs, and stabilize the industry. He stated that cannabis
spans both manufacturing and retailsectors now in decline. It
creates jobs statewide, even in remote towns.
2:41:09 PM
RENEE BERGERON, Accountant, Thomas Head and Greisen PC,
Anchorage, Alaska, testified by invitation in support of SB 73.
She said while the S-Corp exemption benefits cannabis businesses
hit hard by 280E, it also helps small businesses across Alaska.
She stated that many cannabis companies choose C-Corp status to
reduce federal tax burdens from 280Eoften paying 4350 percent
federally. State taxes push that closer to 60 percent, once
excise and local taxes are added. She said for non-cannabis;
Alaska has legacy C-Corpfamily businesses that stuck with the
structure due to costly federal penalties for switching. These
small businesses would now face new state taxes despite
functioning like other pass-through entities, whose owners pay
no state income tax. She stated that the exemption levels the
playing field and ending it unfairly penalizes these businesses
just because of their entity type.
2:44:35 PM
CHAIR BJORKMAN held SB 73 in committee.