Bill would eliminate tax on medical Marijuana
A bill introduced at the state Legislature on Wednesday would eliminate the sales tax on medical marijuana, allowing recreational market to pick up the tab for the state cannabis division.
The aptly-titled House Bill 420 would eliminate the 4% statewide tax on medical marijuana sales, as well as the 3% local option sales tax on medical purchases offered to and enacted by local governments.
Rep. Mike Hopkins, a Missoula Republican, is sponsoring the bill. He carried the 2021 Legislature's regulatory framework legislation following the successful recreational legalization campaign in 2020.
On Wednesday Hopkins told the House Taxation Committee the Legislature had long intended to wind down the tax on medicinal cannabis sales, but the new state program to administer the recreational market needed funding to get off the ground.
The recreational, or adult-use, cannabis market raked in an estimated $48.5 million in tax revenues on about $230 million in sales in its first year, Hopkins said, and is able to relieve medical patients on their purchases.
"The adult-use revenue in the state of Montana is more than capable of funding this program in addition to all of its associated funding buckets," he said.
The Montana League of Cities and Towns testified against the proposal on Wednesday, arguing HB 420 eliminated a local funding source that was installed by local voters. Twenty-three communities voted to tax medical marijuana sales, said Thomas Jodoin, representing the League of Cities and Towns. Repealing that tax would create a $4.5 million dent across those communities, he said.
"If the state doesn’t want to tax medical marijuana it should decide that for itself," Jodoin told the committee.
Hopkins, in response, said cities and towns would survive without a tax that had only been in existence for a year. He also noted it was the state Legislature that granted localities the ability to enact the tax, and therefore the Legislature would decide whether to repeal it.
"Regardless of what local governments need, we don’t tax medicine," Hopkins said.
The number of medical marijuana cardholders has been in flux more or less since Montana approved medical sales in 2004. Prior to recreational cannabis legalization the state had about 40,000 registered cardholders. Today that number is closer to 21,000, as people transitioned to the recreational market, largely due to the convenience of buying cannabis without paying for a doctor's visit and card renewal with the state.
Joanna Barney from Sacred Sun Farms testified in support of the bill.
"The out-of-pocket expenses for these registered individuals are not covered by insurance companies and already carry weight on the wallet," she said.
The committee did not immediately take action on HB 420 on Wednesday.
Committee cannabis bill narrowly passes
House Bill 128, crafted by lawmakers overseeing the recreational industry's rollout last year, narrowly passed out of the House Business and Labor Committee Tuesday.
The 68-page bill makes a number of tweaks to the cannabis regulations passed in 2021, including an extension of the moratorium on new marijuana business licenses.
When lawmakers began shaping the industry ahead of the recreational marijuana market premiering in 2022, they included a moratorium on new licenses until mid-2023. Supporters said the moratorium would shelter the existing cannabis providers from "Big Weed" moving in from out of state and driving mom-and-pop shops out of business.
HB 128 came out of the Economic Affairs Interim Committee, but included a last-minute amendment to extend the moratorium two more years.
Democrats on the committee expressed some serious doubt Wednesday about the moratorium extension. Rep. Katie Sullivan, a Missoula Democrat, said the extension would keep at least 29 businesses that have been waiting for the moratorium to expire after missing the 2020 cutoff out of the recreational market.
"They followed our guidance, they waited their turn, and instead we have put a moratorium extension in that has pulled the rug out from under them," Sullivan said. "… I feel strongly that we need to stick to our word as a Legislature who does business regulation in this state to stop moving goal posts."
Rep. Derek Harvey, the Butte Democrat who is vice chair of the committee, testified that the last-minute push to extend the moratorium came with "threats" from "cannabis interests," and called it déjà vu from times when lawmakers have been strong-armed by the alcohol industry.
Harvey pointed out in committee that the moratorium's effects haven't protected small providers but allowed the state's largest shops to swallow up markets. Indeed, under the 2021 regulations, licensees can expand their dispensary roster without limit.
"This isn’t going to stop the number of shops; this is only going to stop the number of owners," Harvey said.
No committee members spoke up in support of the moratorium during the hearing, nor did Harvey elaborate further on the alleged threats.
Three Republicans joined the Democrats in voting against what had been the product of bipartisan work over the last two years, but the bill still passed out of committee on a 10-9 vote.
