In the slew of bills and tweaks to existing law in Minnesota’s latest budget proposal is a significant tax hike on recreational cannabis, increasing the levy from 10 to 15 percent. By contrast, the gross receipts tax on beer, wine and liquor is 2.5 percent.
Should Gov. Tim Walz sign the budget into law, Minnesota would have one of the highest tax rates on cannabis in the country — and that’s concerning business owners like Steven Brown.
Brown is CEO of Nothing But Hemp, which was among the first hemp dispensaries to open in the Midwest. He joined MPR News host Cathy Wurzer on Morning Edition to talk about the tax’s implications.
The following has been lightly edited for length and clarity. Listen to the full conversation by clicking the player button above.
Why do you think the tax rate on cannabis is higher than alcohol?
I have been really trying to think this one through, and it might be the stigma, and it just doesn't make sense to me at all, especially when Walz seem like a really big supporter of cannabis and wanted legalization. Now it seems like he's punishing a group that hasn't even really got started.
I do. If we really look at the overall tax on this, we're talking about a 15 percent excise tax plus this state sales tax at 6.875 percent, plus an additional local sales tax. For example, in St. Paul, you're looking at a combined tax of 9.875 plus 15 percent.
And then on top of that, I believe cities can add an additional 3 percent excise tax on cannabis. So the effective cannabis tax rate in some cities might be close to 28 percent.
Are you worried that this tax hike could drive customers out of Minnesota?
I think so. I mean, we're already seeing it with the 10 percent tax on hemp. We're one of the only states in the nation that actually taxes hemp. We have some customers that actually say they go over to Hudson to make their hemp purchases now.
The state awarded its first retail licenses last week. What’s it been like to watch the slow rollout of legal recreational marijuana?
You know, I've been sitting back. We didn't apply for a license because the rollout has been absolutely horrible. I think a lot of people are going to lose their shirts. They're not even going to get up and running. There's still a lot that the Office of Cannabis Management and the state need to do before businesses can open up.
[For example] right now, the cities are confused on zoning. These licenses were given out, and now the cities are scrambling. They don't know exactly what to do and how to zone, and so that's going to create a lot of delays.
Different cities have different rules in place, and they make it very difficult to actually be able to operate. For those licenses to get up and running, you have to get the blessing from the city first.
This has all happened under interim leadership at OCM. Do you think that a permanent director could provide some stability?
I think a permanent director could help. I know Eric Taubel does a really good job. I mean, the bill itself is atrocious. It's very hard to operate. The OCM was basically handed a bill that should have never passed, in my opinion. I mean, I'm all for legalization, but the bill has so many issues in it, and they're just trying to navigate it based on state law.
