Black market weed is legal marijuana’s biggest road block

For an entire year now, anyone of age who wants to smoke marijuana in Washington has been able to stroll into a retail store, purchase it, drive it home, and smoke it without breaking the law.

Tourists and casual, curious users are buying it. The sales have brought in $64 million in excise tax revenue in the first retail year. That’s nearly twice the conservative estimate state forecasts charted in 2014, but way under the half billion in revenue touted as a potential by campaigners back in 2012.

But supporters say tax revenue could get that high in 10 to 20 years, especially as improvements are made to this budding industry.

At the moment, the majority of Washington pot smokers are sticking to their old habits. For the ones who have been using marijuana illegally for years, making the switch to legal pot requires serious dedication.

Marijuana smokers need to pay significantly more and they need to drive to one of the 161 legal pot stores across the state, which are generally restricted to areas outside of main, accessible shopping districts. That leaves a thriving black market &#8212 legal marijuana’s biggest road block.

Lawmakers have approved a new bill that tweaks the marijuana law in ways that discourage the illegal market.
That’s great news for producers like Boris Gorodnitsky, co-owner of New Leaf Enterprises, a multi-million dollar marijuana business that has yet to make a profit.

“The only way to eliminate the black market is to provide a better product,” Gorodnitsky said. “And that means accessible marijuana shops with reasonable prices.”

The new law changes the tax structure for marijuana. Now, instead of 25 percent at every level from grower to retailer, it moves to a one-time 37 percent tax at the point of sale. The hope is that will help drive the legal pot prices down and get more consumers out of the underground market.

Gorodnitsky envisions marijuana shops nestled in busy shopping corridors across the state.

“Another huge obstacle is the fact that a lot of the local jurisdictions have put moratoriums and bans on the cannabis business,” he said. “They apparently are under the illusion they’re keeping pot out of their city, but the only thing they’re doing is keeping the criminal pot in the city.”

The new bill also tries to get those cities to lift their moratoriums by offering them shares of the state tax revenue. Only the ones without bans will have access to those greens.

Gorodnitsky was among the new marijuana entrepreneurs pushing the Legislature for industry improvements, like the bill that just passed. Ultimately, he is excited to let go of those battles and move beyond the uncharted waters phase of marijuana in Washington.

“I look forward to the day when I can just run my business,” he said.