Stores that have been trying to cut prices through bundling product with pipes or other items have been told to stop by the state Liquor Control Board, effective immediately.

The bundling allowed stores to charge slightly above cost for marijuana while selling a pipe or lighter at much higher price. That bundling allowed stores to cut down on some of their tax costs which helped them to bring prices down.

Ramsey Hamide, owner of Main Street Marijuana, said that has been the case at his store.

“The bundling allowed us to allocate revenue towards paraphernalia and reduce the price of the weed to the consumer by reducing the excise tax obligation,” Hamide said. “What smart business in the world wouldn’t follow the guidelines as given to reduce tax obligations legally and give consumers a lower price.”

A group of stores around the state had been using the practice, although Main Street Marijuana was the only one using it in Clark County.

Brian Smith, a spokesman for the Liquor Control Board, said the issue had been discussed several times in the agency’s enforcement meetings.

“Some retailers were complaining that their competitors were doing that, and those stores didn’t want to risk their licenses on something that was not legal,” Smith said.

As to how many stores were bundling, it was “more than a handful,” Smith said.

The rule change was made on Feb. 11.

Hamide said the price of a few of their products will increase because the margins would be at a loss without bundling. Most of the store’s inventory won’t be affected, he added.

Hamide said he thinks the new rule will be overturned.

“I already know of at least one retailer who is working on filing an emergency injunction in the coming days,” Hamide said. “We believe their ruling will get overturned and the courts will find bundling to be a perfectly legal and acceptable business strategy. The (rules) just say we can’t sell for below acquisition costs, and now the LCB is trying to dictate how much we can sell product for and how we are allowed to sell it.”

Whether the ban holds or not, the change brings to the forefront the larger issue of taxes. The state charges a 25 percent excise tax at three stages – from grower to processor to store, which many see as excessive. Those taxes have made it a struggle for stores to compete with the black market.

And beyond that, I-502 businesses can’t deduct a lot of their expenses federally because of the illegal status of marijuana. To say it’s a mess is an understatement.

There are some bills in the Legislature that may fix some of those issues. But in the meantime tax season looks like a very bumpy road.

You can find more on the LCB rules here: http://www.liq.wa.gov/laws/laws-and-rules

The recent release is below.

Cheers,
-SueVo (sue.vorenberg@columbian.com)

Emergency Rulemaking

The Washington State Liquor Control Board filed emergency rules with the Code Reviser’s Office to revise current recreational marijuana rules by defining, consultant, intermediate product, paraphernalia and selling price. In addition to the definitions two new WAC’s were created, and one amended, to address current issues in the marketplace:

WAC 314-55-017 Conditional sales prohibited. It has come to our attention that some licensees are engaging in the practice of conditional sale or “bundling” where for example a customer purchases a lighter for $20 which includes the purchase of 1 gram of marijuana for two dollars to avoid paying the requisite taxes on the marijuana. This practice is now prohibited and the selling price of marijuana products must be indicative of their true value without any other products or services.

WAC 314-55-018 Prohibited practices – Money advances, Contracts, Gifts, Rebates, etc. Further defines practices that licensees are prohibited from engaging in.

Amended WAC 314-55-077 What is a marijuana processor license and what are the requirements and fees related to a marijuana processor license? For public safety reasons further revisions were made to this WAC regarding marijuana infused edible packaging and labeling.

Specifically:
-Requires marijuana-infused edible solids with more than one serving to have each serving individually packaged in child proof packaging within the outer package.
-Requires marijuana-infused edible liquids with more than one serving to include a measuring device in the package.
-Added brightly colored products to the list of products especially appealing to children.

The board approved emergency rules for WAC 314-55-010, WAC 314-55-017, WAC 314-55-018, and WAC 314-55-077. The rules become effective today, February 11, 2015, and expire June 11, 2015.