The Washington State Office of Financial Management (OFM) recently released a revenue forecast that provided a glimpse of cannabis tax revenues collected this year. As the state levies a 37% excise tax only at the point of retail sales, the tax collection figures serve as a proxy for retail demand.
While the OFM’s overall assessment is that cannabis tax revenue growth is expected to level off, monthly receipts from this year show sales on a sharply upward trajectory from the spring through August.
Monthly cannabis tax collections slouched to about $30 million in both February and March 2019, indicating roughly $81 million in retail sales in each of those months. However, tax receipts from retail cannabis sales spiked in April and grew through the summer months, eventually reaching record levels in August of over $35 million, or around $95 million in gross retail revenues, based on the state’s tax rate.
The cannabis tax data released by OFM shows that, like Colorado and Oregon, Washington’s legal cannabis market is experiencing unprecedented levels of demand. Previously, official data from Washington regulators on cannabis sales and production in the state has been scarce.
Still, even as demand reached record heights in August, Washington’s Spot Index leveled off in the weeks from August 16 through September 13, ranging between a low of $830 and a high of $847 per pound in that period. As we saw in Oregon’s market, it is possible that a seasonal supply increase from late-summer light-deprivation harvests injected additional inventory in Washington’s licensed system.
Meanwhile, fallout from the vaping crisis recently hit Washington State in the form of a lawsuit brought against legal cannabis businesses over the matter. According to a report from the Seattle Times, “A Puyallup Tribal Police officer who spent three days in the hospital with lipoid pneumonia is suing the distributors and manufacturers of a vape pen and THC oils he used off-duty for pain and stress relief.” The Times goes on to state that the lawsuit is believed to be the first filed in Washington; to the knowledge of our analysts, we believe it to be the first filed in the country against legal cannabis businesses specifically.
The Times lists the businesses named in the lawsuit as Conscious Cannabis, Rainbow’s Aloft, Leafwerx, MFused, and Jane’s Garden. The preceding businesses are described as manufacturers or distributors of cannabis vape cartridges. The Times also states that CannaBrand Solutions, a “distributor of Chinese-made CCell pens and batteries,” is named as a defendant.
While the outcome of this lawsuit is far from certain, it could be a sign of more to come from those that have fallen ill or the families of those that have passed away as a result of vaping. Even if legal cannabis companies are ultimately found not to be liable for the illnesses and deaths, the time and expense that goes into defending against litigation can be a drain on any business. Additionally, legal action will likely compel cannabis companies to exercise greater scrutiny in regard to the ingredients and hardware used in their products, even if they are not currently named as defendants in active suits.