Section 5 G.S. 105-164.4(a) is amended by adding a new subdivision to read:
“The rate of five percent (5%) applies to the sales price of cannabis, cannabis-infused products as defined in G.S.90-730.1, cannabis plants, cannabis seeds, cannabis cultivation equipment, and related cannabis supplies. A person who sells cannabis, cannabis-infused products as defined in G.S. 90-730.1, cannabis plants, cannabis seeds, cannabis cultivation equipment, and related cannabis supplies is considered a retailer under this Article. For the purpose of this subdivision, cannabis has the same meaning as marijuana under G.S. 90-87(16).”
So let’s have a look at how these numbers apply in a real life situation. We will base our model on an abstract physical quantity of cannabis because we have no idea what producer will charge for a specific amount. Instead we will use $100.00 dollars worth.
The first cost is the production fee to the state of 10% of gross wholesale sales. Our $100 amount now passes on to the retailer as $110.00. Next the retailer adds his markup.
Markups at US medical dispensaries
According to a team member who is knowledgeable about the industry, medical dispensaries typically seek to double their money. For example, the dispensary might purchase a premium grade of medical marijuana for $3,600/lb and then sell it for $7200- 7600/lb, a markup of over 100%. For less premium grades, the markup can actually be higher because the dispensary can buy it at a lower cost, for example at $2,000-3000/lb and then sell it for $6000/lb, a markup of 100-200%.
Access points also report a 100% markup rule of thumb and charge about $10 per gram. There are 453.6 grams per pound, and that corresponds to purchase and sales prices of $2,268 and $4,536 per pound, respectively. This is broadly consistent with the figures in the previous paragraph.
Four medical marijuana dispensaries in Washington State were surveyed. Provided below are the average prices for usable marijuana from the locations as well as the overall average. Based on this data, the markup from ounce to gram is 30%, once the prices are all converted to price per gram.
Our $110 quantity will now make the cash register ring to the tune of $220 plus and additional fee on gross sales of 10% or $22.00 for a total register ring of $242.00. Now we add in the Sales tax of 5% or $12.10. The total collected by the government?
10+22+12.10=44.10 Thats a 44.10% up charge for the government on a $100.00 wholesale cost product. Once again this money will come directly out of the after tax income of people who are ill and in all likelihood unable to work.
It is interesting that the 10% “fee” on gross production and the 10% “fee” on gross sales is termed a fee instead of a tax. If I am not mistaken the North Carolina State Constitution requires any new tax to have a purpose. That the money collected as a result of this new tax be held and used only for its stated purpose. Does calling it a fee avoid this requirement and move the fees collected directly to the general fund with no oversight as to how it is spent? Another thing to ponder is: 2017 North Carolina corporate tax rate is to move to 3% with a target rate of 0%. Corporations are people my friend how in the world does the general assembly justify applying a tax (fee) burden of 44.10% (against wholesale pricing) to sick people who most probably are unemployable due to illness and a 0% tax rate to a corporation, also a person?
Monthly Fees And Reporting
Section 1 Subsection 4
“Each person who (i) holds a medical cannabis center license and either a producer of medical cannabis license or cannabis-infused products producer license, or both, and (ii) operates both a retail medical cannabis center and one or more production sites shall pay to the Department monthly fees equal to fifteen percent (15%) of that person’s gross revenue derived from retail sales of cannabis and cannabis-infused products produced by that person.”
The fee is based upon 15% of the retail sales of cannabis and cannabis infused products produced by that person. It. Appears that there would be no 10% tax on production.
Pig farmers are contract farmers for different houses, i.e. Murphy farms and Smithfield. Those contract farmers get many economic advantages, guaranteed pricing, bulk buy materials, financing advantages (which will be huge given the banks position on the cannabis business) in return for the production contract. Structured correctly a front group gets a 6% price advantage and control of acquisition costs and retail pricing and can aggressively drive out the competition by setting retail pricing advantageously. This is similar to what EpiPen has done.
Section I Subsection 5
“Nothing in this subsection shall be construed to exempt persons licensed under this section from the reporting or remittance of sales tax for any transaction upon which a sales tax may be levied.”
Is medical cannabis taxable or is it not? Before accepting “fees” the tax situation needs to be absolutely clear.
NCCPN requires Section 5 G.S. 105-164.4(a) to be removed
NCCPN objects to the proposed 10% production fee