WA pot sales decline for the first time in the decade since legalization

This December marks a decade since Washington state became one of the first two states in the United States to legalize marijuana.

A look back at the growth of the cannabis industry in the Evergreen State shows that the fledgling market has not yet matured, as sales have declined after surging during the pandemic and the early years of legalization.

The first retail cannabis stores opened in 2014 after voters in Colorado and Washington approved ballot measures legalizing recreational use and the sale of small quantities of cannabis in 2012.

Since then, sales have grown exponentially, from about $180 million in 2015 to over $1.3 billion in July 2022. In fiscal 2022, the state collected $509 million in excise tax revenue.

However, growth in the cannabis industry slowed for the first time in fiscal 2022 compared to previous years. Retail sales were down 8% from 2021 — a drop in sales of about $120 million.

“What you’re seeing as ‘dip’ is really that sales are returning to normal growth as more people return to in-person work,” said Brian Smith, spokesman for the Washington State Liquor and Cannabis Board.

According to a recent report from cannabis data company Headset, the decline in Washington’s cannabis market is part of a national trend in declining sales that has been evident since July 2021.

Headset’s study of legacy markets in California, Colorado, Oregon, and Washington found that the frequency of in-store marijuana purchases and the amount of money people spend in stores have been declining since July 2021.

In Washington, the study found that the average consumer purchase of cannabis products at a store fell by nearly $3, from $34.14 in July 2021 to $31.41 in July 2022.

In these markets, the study found a greater decrease in store visits than the relative decrease in money spent on cannabis products.

Where cannabis sales have grown

In Washington, the largest source of retail sales is King County, where retailers sold over $340 million worth of recreational cannabis products in fiscal 2022, according to data from the state Liquor and Cannabis Board.

This was followed by sales in Pierce, Spokane and Snohomish counties. These counties also saw sales declines from June 2021 to July 2022.

Among the counties that saw gains, the largest was in Pend Oreille County in eastern Washington on the Idaho border, where sales grew 60% in fiscal 2022.

With a small population, small changes can have a seemingly large impact, Smith explained. The lone shop there recently moved closer to the Idaho border, with out-of-state customers accounting for at least some of the increase in sales.

A growing national market

Since Washington and Colorado legalized cannabis in 2012, 19 other states and Washington, DC have taken steps to regulate its recreational use. As of December 2022, 39 states have legalized cannabis for recreational or medicinal use.

Only three states still treat cannabis in all forms as an illegal substance – Idaho, Kansas and Nebraska.

But while Washington has been at the forefront of legalizing cannabis, its 37% excise tax rate is by far the highest such tax in the United States

Combined with the state’s high sales tax, Washington residents pay an average 46.2% tax rate on marijuana products (if you count local taxes).

“As a side note, this high rate could lead some consumers to purchase their cannabis products in the unregulated, untaxed, illicit market,” says the Washington CannaBusiness Association.

The organization worries that this high taxation and other state restrictions on extrastate funding and interstate commerce are weakening Washington’s national lead in a burgeoning cannabis industry.

However, smaller companies like those of the Craft Cannabis Coalition argue that some of these restrictions keep the industry local, maintain a level playing field for small players, and control the illicit cannabis market that still exists.

To stay ahead of the curve in the event marijuana is legalized federally, WACA is now lobbying for a trigger law, similar to that passed in Oregon and recently in California, that would allow interstate commerce the moment the Federal restrictions lifted.

https://www.spokesman.com/stories/2022/dec/19/wa-pot-sales-decline-for-first-time-in-the-decade-/ WA pot sales decline for the first time in the decade since legalization

Brian Ashcraft

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