Mary Jane's Business Model

Okay, another commentary on marijuana for us to ponder. It seems several times a month another news event prompts me to write an additional story about a product which by now should be as legal as tobacco and alcohol.

This time, as reported in the Wednesday afternoon edition of USA Today is a forecast in Colorado and Washington, by 2018, there will be $8 BILLION in sales between medical and recreational sales. This in only two states! Approximately $4 billion in each category and this is a conservative estimate. 

At a 15% tax rate applied to the retailer as a Federal excise tax,  that translates to $1.2 billion to the Federal treasury. In more populous states, like California, New York, Florida and Texas, at gross sales of $10 billion in each state, that would push a total of $6 billion more into Federal coffers. These are of course, conservative estimates. 

Then, in order to maximize the return to the states, let's say another 10% special State excise tax is applied BEFORE it reaches the retailer, just like alcohol and tobacco. So now, as it reaches the retailer in New York or Florida, that $10 billion harvest price is now almost $13 billion. 

The retailer adds another $2 billion to cover his cost and profit on the sale, so it is now $15 billion before sales tax. In New York, on Long Island where I live, that is an additional state and local tax at 8.625%, bringing the total cost to the consumer to $16.2 billion. Seems like a lot, but think what we spend on a 750ml bottle of a domestic bottle of Jack Daniels. $42 sound right to you? As one who drank Jack for years, it seems right to me. 

For alcohol sales generally, both the Federal and State governments added excise taxes, and New York added state and local sales taxes to that.

A carton of cigarettes can range to as much as $100 or more on Long Island for ten packs of a product we know will give you cancer and other health problems. The Federal and State governments added excise taxes, and of course New York adds the customary sales tax on top.

English: Excise Cigarette tax per state. Information from Cigarette taxes in the United States No Excise Tax Per Pack $2 Excise Tax Per Pack $4 Excise Tax Per Pack $6 Excise Tax Per Pack  (Photo credit: Wikipedia)

There is a lot of money which could be made by all the players in the game. The consumer will pay the price because it isn't really all that much in the scheme of things that we all purchase. After all, if we want it, we will pay whatever the cost.

At least marijuana, currently, is not known to make you sick. In fact, it has medicinal purposes, known for years to help ease the pain from many diseases, and helps you through the effects of some cures, like chemotherapy.

Remember, my numbers are conservative. Imagine if they were twice or three times my estimates. Then, we would be talking serious money….. Just saying.

Don't forget the money the federal and state governments will save not having to pursue “criminals” who sell marijuana since they will be in licensed facilities. Or jail them. Oh, and the fees the state will take in granting dispensary licenses? Don't forget those fees. Renewal fees? Yep! Does it start to make sense now?

It takes courage to take that huge next step. Who will that be?