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?Recreational Marijuana: Distribution, Advertisement and Taxation Regulations 15th February, 20171279Recreational Marijuana: Distribution, Advertisement, and Taxation Regulations The recent legalization of recreational marijuana in several American states has led to the creation of new laws aimed at regulating production, processing, and usage. This market has opened the government to sources of revenue that were previously closed due to the criminalization of marijuana and hemp, creating concerns regarding the cash-based trade, such as tax evasion and accountability. While the industry has proved to be important for the economic growth and sustainability of the states where it is legal, many people worry about the implications of recreational cannabis, its widespread advertisement, and how it will affect their community and children. LicensingU.S states that have legalized recreational marijuana, have implemented strict laws regulating who can produce, process, transport, and sell any cannabis product. Those looking to enter the industry are required to obtain a state license. While not impossible, many issues can bar an applicant from obtaining such a license. In all states, a felony charge or other drug related conviction results in an immediate refusal; other grounds for refusal are tax evasion or failure to comply with local jurisdiction in the past. In most states, any one person can apply for a license for every aspect of the industry; however, Washington state law prohibits a producer or processor from having direct or indirect financial interest in a retail establishment (Washington Measure 502). Seeking to prevent vertical integration, a business strategy wherein all aspects of an industry are controlled by one company, Washington is effectively keeping financial interest in one sector, an important factor in quality control. By forcing financial interest to remain in a single sector, the government ensures that quality will not be sacrificed for profit. While Washington is the only state to enact legislation of this kind, other states have ratified regulations regarding the amount of marijuana permitted to be sold at one time and the percentage of product a retailer is required to produce for sale. Colorado, for instance, included a provision in which dispensaries are expected to produce 70 percent of the product they sell. Alex Altman, a Washington correspondent for TIME, asserts that regulators specifically stipulated a minimum growth-expectance to limit supply; thereby, allowing local legislature to have greater control on the industry, and restricting access, an important factor in the battle to curtail underage usage (2014). Restricting underage usageA serious concern for many politicians and parents is the effect that the normalization of cannabis use will have on youth. In response, every state with legalized recreational marijuana has a minimum age of purchase at 21, an attempt to treat cannabis in the same respect as alcohol. Patrick McGreevy, a reporter for the LA Times, compares the provision of California’s Proposition 64, which would allow marijuana merchants to publically advertise their products, to the marketing techniques of the tobacco industry before Nixon’s legislation barring cigarette ads on television and radio. The proposition offers regulations to restrict exposure of minors, requiring that “any advertising or marketing placed in broadcast, cable, radio, print and digital communications shall only be displayed where at least 71.6 percent of the audience is reasonably expected to be 21 years or older” (p.7, 2016). Opposition argues that despite the stipulation, minors would still be exposed to marijuana ads. This debate is rendered irrelevant, however, due to the federal regulation of television and radio broadcasting. Marijuana is still classified as a Schedule I drug, a “drug with no currently accepted medical use and a high potential for abuse” (DEA), signifying that any use, possession, or promotion of cannabis is a federal offense. A more relevant concern regarding advertisement is that of signs, billboards, and posters in areas open to the general-public. States with legalized recreational marijuana all possess regulations regarding physical marketing, often limiting ads to a certain size, and location. Proposition 64 and Colorado law offer more stringent parameters, specifying that ads may not contain cartoons or other stuffs that may be attractive to underage persons. The aim of this is to limit the exposure and normalization of cannabis use to minors. Cash-based revenueThe marijuana industry has proven to be a significant source of revenue for the government and continues to grow exponentially. For example, the Colorado state remitted tax report for the 2016-17 fiscal year shows a fifty-nine percent increase from the 2015-16 fiscal year, bringing in a total of 102 million dollars. Like other states that have legalized recreational marijuana, Colorado has a layered tax system: a 15 percent retail-marijuana excise tax, a 10 percent retail-marijuana sales tax, and the 2.9 percent state sales tax. Combined with the fees collected by local legislature for license applications and penalty fees, the total amount collected by the state government was 108 million dollars, a 51.2 percent increase from 2015-16’s 72 million dollars (Colorado tax report, 2017). Likewise, Oregon’s single 17 percent state marijuana tax resulted in a 60-million-dollar profit for the fiscal year; which, while significantly less than Colorado’s revenue, still proved substantial (Oregon tax report, 2017). Most of the money collected by the government is contributed directly to research facilities or state funded programs and universities. Washington, for instance, has a detailed arrangement for the distribution of funds: $125,000 to the Department of Social and Health Services for youth surveys regarding drug and alcohol abuse; $50,000 to the Department of Social and Health Services for cost-benefit evaluation; $5,000 to the University of Washington’s alcohol and drug abuse institution for a website dedicated to the education of the public on the realities of drug use; less than $1,250,000 to the state liquor control board; and the remaining divided into programs for education and support for alcohol and drug abuse. By seeking to educate people on the realities of using marijuana, the government is addressing many people’s valid concerns about the effect that legalized marijuana can have on the community. Because federal law prohibits banks from storing money gained through illicit means, the marijuana industry is primarily cash-based (Altman, 2014). Altman reports that the cash-based system creates a convenient loophole for tax evasion. He describes how no method to monitor the true amount made by dispensaries without bank or credit statements exists. Most dispensary owners store their money in private locations, often in bunkers or modified basements; however, there are instances where “sympathetic bankers” operate in a “don’t ask, don’t tell” fashion, ignoring federal laws and housing money gained through the marijuana industry (Altman, 34). Fiona Ma, chairwoman of the California Board of Equalization, stated that in 2014 the estimated $44 million generated from the sales tax placed on medical marijuana dispensaries only represents the revenue of 25 percent from the companies required to pay a tax. This estimated disparity between the number of eligible dispensaries and those paying their taxes can be applied to recreational marijuana as well, showing how federal restrictions are negatively affecting the annual revenue of individual states that have partaken in the democratic process. Conclusion While marijuana is still illegal on a federal level, many states have taken the initiative to begin to create a system for the safe and legal distribution of recreational cannabis. By implementing legislature to monitor who can produce, process, and sell marijuana, state governments are beginning to create a structure based on accountability, and hope to restrict access to cannabis for underage users. The industry is also a significant source of revenue for the state, providing direct funding to organizations and facilities whose purpose is the exploration and education of drug and alcohol abuse. Though there are still gaps in the legislature passed which provide loopholes for tax evasion, the industry is fairly-new and can be improved to eliminate these flaws. ReferencesAltman, A. (2014, January 27). Pot's money problem.?Time,?183(3), 32. Retrieved February 1, 2017, from Academic Search Complete.California assembly bill 64, 1-9 (2016).Colorado constitution, Art. XVIII, Sec. 16 (2014). Colorado house bill?16-1261, 1-8 (2015).?[Colorado marijuana taxes, licenses, and fees transfers and distribution for the 2015-16 fy]. (2017, January). Published raw data.Davenport, S., Caulkins, J. P., & Kleiman, M. A. (2015). Controlling underage access to legal cannabis.?Case Western Reserve Law Review,?65(3), 541.Liptak, A. (2004, June 03). Washington: Judge strikes law on ads for legal marijuana. Retrieved from , P. (2016, July 31). California initiative draws fire for opening the door to TV ads that promote pot smoking. Retrieved January 31, 2017, from house bill 3400, 1-111 (2015). Oregon Department of Revenue. Marijuana tax. (2016). Oregon marijuana tax report. (2017, January). Schneider, D. (2014, March). Pot economics. (cover story).?Dollars & Sense,?(311), 11. Vaida, J. M. (2016, May). The altered state of American drug taxes.?GPSolo,?33(3), 74-75. Washington initiative measure 502, 1-65 (2011).? ................
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