The Alaska Department of Revenue (ADOR) recently posted information on tax collections from the wholesale side of the state’s adult-use cannabis industry for the final quarter of 2018. According to the state’s data, tax revenues and the volume of flower traded wholesale reached record highs in October but subsided in the wake of the fall harvest. Crops generated in the final portion of 2018 appear to have been adequate to meet demand at the time, and then some, as wholesale prices in the state trended downward to close last year, behavior that has persisted into 2019.
The tax collection figures from ADOR state that 122 licensed growers paid a total of $1,841,705 in tax to the state in October, 115 cultivators remitted $1,439,812 in tax in November, and 121 farmers closed 2018 by paying $1,493,903 in tax in December. October’s monthly tax revenues represent a historic high for Alaska’s licensed adult-use market, exceeding the previous record high of over $1.54 million in tax paid by growers in August 2018.
October’s tax collections were up by 24.3% compared to those of the month prior. Receipts from the cultivation tax then dropped by 21.8% month-over-month in November, before rising by 3.8% in December.
October saw 1,904 pounds of flower change hands in the state’s market. Flower trading volume contracted to 1,448 pounds in November, then rose to 1,558 pounds in December.
The volume of trim that was traded declined over the course of Q4 2018. 1,327 pounds were sold by cultivators in October, 1,173 pounds changed hands in November, and 1,030 pounds were moved by growers in December. Cultivators in Alaska pay a flat tax rate of $50 per ounce (or $800 per pound) on wholesale sales of flower and $15 per ounce ($240 per pound) on supply-side deals for trim.
The harvest season for Alaska’s outdoor growers comes earlier than it does for those in the continental U.S., due to the state’s higher northern latitude. Collections from the state’s tax on cultivators peaked in October in both 2017 and 2018. The timing suggests that the bulk of crops are cut down in September, then dried and trimmed – though not necessarily in that order – for sale in October.
ADOR’s monthly reports from Q4 2018 result in complete wholesale trading volume figures for the country’s smallest adult-use cannabis market. Overall in 2018, Alaskan cultivators moved 16,048 pounds of flower and 12,235 pounds of trim. Those volumes are up dramatically from 6,324 pounds of flower and 4,418 pounds of trim that changed hands in the state’s licensed market in 2017. Regulated cannabis sales only began in Alaska in October 2016.
Alaska’s Spot Index generally trended downward over the course of Q4 2018, behavior that has persisted so far this year. For the final quarter of last year, the state’s weekly composite price slid by 8.4% from the beginning to the end of the period. Q4’s mean going rate is off by 4.5% from Q3 2018. Although cultivation tax collections from the early months of this year are not yet available, it appears that last year’s significantly increased output by the state’s growers was enough to meet existing demand at the time and push down supply side rates.
Still, it must be pointed out that the volume of product moved in Alaska’s adult-use market is a fraction of that which changes hands in other states with general legalization. Based on our estimates of the size of state wholesale markets, Nevada saw almost four times the flower trading volume of Alaska in 2018, while Oregon farmers moved over ten times the amount of flower traded in Alaska last year. The size of Alaska’s wholesale adult-use market is more comparable to some states with only medical legalization, such as New Mexico and Rhode Island. We discuss our estimates of the size and value of wholesale markets covered in our reporting in more detail in our upcoming Annual Review & Outlook, to be published in the coming weeks.