Pubdate: Mon, 05 Jan 2015
Source: Arizona Republic (Phoenix, AZ)
Copyright: 2015 Associated Press
Author: Gene Johnson, Associated Press


Medical Uses, Black Market Pose Challenges for Legal-Pot States

SEATTLE (AP) - A year into the nation's experiment with legal, taxed 
marijuana sales, Washington and Colorado find themselves wrestling 
not with the federal interference many feared, but with competition 
from medical marijuana or even outright black market sales.

In Washington, the black market has exploded since voters legalized 
marijuana in 2012, with scores of legally dubious medical 
dispensaries opening and some pot delivery services brazenly 
advertising that they sell outside the legal system.

Licensed shops say taxes are so onerous that they can't compete.

Colorado, which launched legal pot sales last New Year's Day, is 
facing a lawsuit from Nebraska and Oklahoma alleging that they're 
being overrun with pot from the state.

And the number of patients on Colorado's medical marijuana registry 
went up, not down, since 2012, meaning more marijuana users there can 
avoid paying the higher taxes that recreational pot carries.

Officials in both states say they must do more to drive customers 
into the recreational stores. They're looking at reining in their 
medical systems and fixing the big tax differential between medical 
and recreational weed without harming patients.

And in some cases, they are considering cracking down on the 
proliferating black market.

"How can you have two parallel systems, one that's regulated, paying 
taxes, playing by the rules, and the other that's not doing any of 
those things?" said Rick Garza of the Washington Liquor Control 
Board, which oversees recreational pot.

The difficulty of reconciling medical marijuana with taxed 
recreational pot offers a cautionary tale for states that might join 
Washington and Colorado in regulating the adult use of the drug.

While legalization campaigns have focused on the myriad ills of 
prohibition, including racial discrepancies in who gets busted for 
weed, the promise of additional tax revenues in tight budget times 
was in no small part of the appeal.

Weed sales have so far brought in some revenue, though less than 
officials might have hoped.

Colorado brought in more than $60 million in taxes, licenses and fees 
for recreational and medical marijuana combined through October of 
this year, and more than half of pot sold was of the lesser-taxed 
medical variety.

In Washington, where supply problems and slow licensing hampered the 
industry after sales began in July, the state collected about $15 
million in taxes this year.

The latest states to legalize marijuana - Oregon and Alaska - have 
different concerns, but officials there are nevertheless paying 
attention to Colorado and Washington as they work on rules for their 
own industry.

Alaska doesn't have commercial medical dispensaries, so licensed 
stores there won't face direct competition. And in Oregon, taxes on 
recreational pot are set at just $35 an ounce, which officials hope 
will minimize competition from the medical side.

In Seattle, however, six licensed recreational stores face 
competition from medical pot shops that are believed to number in the hundreds.

"Am I afraid about medical marijuana dispensaries taking my business? 
They have all the business. They are the industry," said James 
Lathrop, the owner of Seattle's first licensed pot shop, Cannabis City.

He said the dominance of medical marijuana and the black market is 
obvious in his clientele: It's mostly tourists and professionals who 
use pot occasionally and don't mind spending a little extra at a legal store.

Regular pot users have stuck with their old dealers or continue 
masquerading as patients, he said.

Reining in medical marijuana will be a top priority when the 
legislative session begins in Olympia next month.

The question, lawmakers say, is how to direct people into the 
regulated system - maximizing state revenues - without hurting 
legitimately sick people who use marijuana.

Ideas under discussion include reducing pot taxes to make 
recreational stores more competitive and eliminating medical 
dispensaries, which have been largely tolerated by law enforcement 
even though they aren't allowed under state law.

The state could lift its cap on the number of recreational stores and 
license dispensaries to sell pot for any purpose.

Seattle officials have signaled that they intend to start busting 
delivery services that flout the law and recently sent letters to 330 
marijuana businesses warning them that they'll eventually need to 
obtain state licenses or be shut down.

Tacoma has also announced plans to close dozens of unregulated pot shops.

Officials have less leeway to alter the medical marijuana system in 
Colorado, where it was enshrined in the state constitution in 2000. 
But lawmakers are nevertheless set to review how it is regulated next 
year because the state's 2010 scheme is expiring.

Taxes will be a large part of the discussion. Medical pot is now 
subject only to the statewide 2.9 percent sales tax, one-tenth of the 
taxes levied on recreational pot.

Colorado's medical marijuana registry has grown from 107,000 people 
in late 2012 to about 116,000 this year, though marijuana patient 
advocates dispute that the growth is tax-driven.

Associated Press writer Kristen Wyatt in Denver contributed to this report.
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MAP posted-by: Jay Bergstrom