The Alaska Department of Revenue (ADOR) recently issued July 2022 tax collections from the wholesale side of the state’s cannabis market.
July 2022 saw 1,508 pounds of flower change hands, down 3% from 1,556 pounds in June 2022 and down 16.5% from 1,806 pounds in July 2021. Alaska’s cannabis cultivators are taxed at a flat rate of $50 per ounce ($800 per pound) which brought $1,206,377 to state coffers in July 2022.
Trim sales were 2,512 pounds in July 2022, up 13.9% from June sales of 2,206 pounds of trim and up 12.7% from July 2021’s sales of 2,228 pounds of trim. Trim is taxed at $15 per ounce ($240 per pound) and brought $602,762 to the state in July 2022.
July 2022 saw 1,370 pounds of Immature/Seedy/Failed plant material change hands, down 6.7% from June 2022’s 1,468 pounds, but up 27.3% from the 1,076 pounds that changed hands in July 2021. Immature/seedy/failed plant material is taxed at $25 per ounce ($400 per pound) and brought the state $548,171 in July 2022.
The month-on-month and year-on-year increases in Trim and Immature/Seedy/Failed plant material appear to reflect a rotation away from flower toward extracted and infused products. Sources have indicated Alaskans have a preference for very high THC content, a feature more easily engineered into extracted products than flower. However, cultivators might be choosing how their crop is characterized based on how much tax they can afford to pay. Is $800 per pound a reasonable amount to pay for flower that may not find its way to retail or is it better to pay a lower tax and sell plants as biomass for extraction and pay as low as $240 per pound while avoiding the cost of plant trimming, packaging, and, in some cases, transportation? Given the spot market price of flower is at an all-time low level at $2,548 per pound and the demand for high THC products, growers might decide to grow increasingly for the extraction market and / or grant themselves significant leeway in categorizing product for tax purposes.
As noted above, recent data from the Alaska Department of Revenue suggests extracted and infused products are becoming more popular in the state, with sales of Trim and Immature/Seedy/Failed plant material increasing as flower demand softens. ADOR data interpretation can tell only a simple story: demand is moving from one type of plant material to another, not why or how this trend is emerging or the on-the-ground story of the Alaska cannabis market.
To get that story, Cannabis Benchmarks spoke to Ryan Tunseth, President of the Marijuana Industry Association (MIA) and a cannabis retailer in the state. Sources in Alaska had been expecting a jump in cannabis sales from the second, post-pandemic tourist season this summer. Tunseth said his feeling was that cannabis sales were “flat this summer, maybe down a bit” amid the tourist season. He noted the state of Alaska had approved a jump in the Permanent Fund – an oil industry dividend paid by the state to residents each year – to $3,200 per person, a significant increase from which cannabis businesses expected to benefit. However, the boost in sales never came – from tourist season or, thus far, from the larger Permanent Fund payments.
While the ADOR data suggests a rotation away from flower, the fact is much of the flower finding its way onto retail shelves has been re-classified by cultivators as “trim,” a product taxed at just 30% of the tax rate for flower. Tunseth said this practice is causing “infighting because people selling bud for trim are undercutting bud prices.” He is keenly aware of the stress of tax obligations on the cannabis business, an issue being addressed by his organization.
The full interview is available in the September 16, 2022, Premium Report.