On Nov. 6, The Washington State Liquor Control Board suddenly faced a monumental task: Creating the world’s first legal, regulated and taxed marijuana market.
The small agency, which has historically licensed bars and liquor retailers, now must invent the foundation for what will almost surely become a multi-billion dollar industry of marijuana growers, distributors and retailers.
Questions about how this legal marijuana market will operate abound. Will there be restrictions on the size of marijuana farms? Will farms and retailers be required to take certain security measures to ensure their product isn’t stolen? How can police verify that the marijuana people use came from a licensed retailer?
Nobody knows, said Mikhail Carpenter, a liquor board spokesman.
“The system is being built from the ground up,” Carpenter said. “Unfortunately, this sort of system doesn’t exist anywhere else in the world.”
Initiative 502, which was approved by voters by 10 percentage points Nov. 6, allows people 21 and older to possess up to an ounce of marijuana. It calls for growers, packagers and retailers to be licensed through the liquor control board and for their product to be taxed at a rate of 25 percent at each point in the supply chain.
People without medical marijuana permits won’t be allowed to grow their own marijuana. Instead, consumers will be able to buy both raw marijuana buds as well as marijuana-infused foods at one of the 332 licensed marijuana retailers projected to spring up across the state, according to state officials.
Don’t expect to jump in line at a local marijuana store anytime soon. Carpenter said this week that the liquor control board expects to take the full year given it by Initiative 502 to set up the new marijuana market, and no retailers are expected to open before then.
The board will regulate the market from seedling to cash register, and will finance its regulatory efforts with an annual budget of $5 million, paid for by marijuana taxes.
But how the agency will go about all of this is unclear. For example, legal marijuana will be taxed and regulated, much as cigarettes are. Cigarettes include a tax stamp. But even if regulators stamp a package of marijuana, anyone can crack it open and pocket the contents and throw away the package, making it potentially impossible for police to distinguish between legal marijuana and marijuana bought on the black market.
“It’s a challenge,” Carpenter said, adding that people are starting to offer creative solutions. One, he said, would involve packaging marijuana in one-time-use quantities like pieces of gum, which could then be labeled with a tax stamp. He cautioned that the gum-wrapper idea is only a suggestion and it’s not necessarily how the state will solve the problem.
Jay Fratt, who owns three Smokin’ J’s smoking products stores in Longview, Vancouver and Centralia, said he’s the type of businessmen I-502 backers may have been hoping would get into the legal marijuana business. He said he follows state and federal laws and is a longtime business owner, having run Smokin’ J’s for 15 years.
“The people that they want to get into this business are people who are going to adhere to the law, pay the taxes and follow all the regulations that they set up,” said Fratt, 39, of Longview.
But Fratt, whose store sells all sorts of pipes, bongs and other products, said he has no interest in opening a shop that sells marijuana — at least not yet. The main reason, he said, is that the drug is still illegal under federal law, and he worries his business would become a target for federal drug agents. Mainstream business may steer away from selling marijuana until federal officials clarify their position, he said.
In the meantime, he said, marijuana shops may be operated by “a fringe element” of society who aren’t as dedicated to following all the rules.
In addition, Fratt said he worries that the drug will be so highly taxed that the new legal market will fail to undermine the black market.
Still, he said the new law could be a boon to his business, especially if local shoppers become “more comfortable” with smoking marijuana and the drug carries “less of a taboo.”
Marijuana legalization imposes new duties on the liquor control board just after it was tasked with shutting down the state’s liquor stores after voters in 2011 decided to privatize the market.
“It’s been a busy year,” Carpenter said. “This agency has been through a lot in the last year.”
Asked if there has been talk of changing the agency’s name now that it will regulate marijuana too, he laughed and said people have been emailing suggestions, but there’s no talk of an official change.
“The most common one has been the ‘Washington State Liquor and Cannabis Board,’” he said. “Somebody else said, ‘The High Command.’ That was cute.”