Alaska House Passes Cannabis Industry Tax Reforms

The Alaska House of Representatives on Friday passed significant tax reforms for the state’s adult-use cannabis industry in what would be the first major legislative change to the state’s cannabis program since it was adopted 10 years ago, the Alaska Beacon reports. The House voted 36-3 in favor of the proposal, which moves next to the state Senate for consideration.

Under the original 2014 cannabis legalization law, Alaska’s cannabis industry currently pays a $50-per-ounce wholesale tax. The House-approved proposal would remove the wholesale tax and replace it with a 7% sales tax.

The tax changes are based on a 2022 task force analysis requested by Gov. Mike Dunleavy (R), which found the industry would benefit from a new tax system. The proposal originally called for just a 3% sales tax but the number was raised over concerns that the low tax rate would not be viewed favorably in the Senate, the report said. Lawmakers first adjusted the tax rate to 10% — then dropped it to 6% — before ultimately landing on a 7% sales tax on adult-use cannabis transactions in the state.

Alaska was the fourth state to legalize adult-use cannabis in 2014, following closely in the footsteps of Colorado, Washington, and Oregon.

A 2021 report found that Alaska cannabis operators owed nearly $1.8 million in back taxes under the flat-tax structure paid by growers instead of retailers.