The Columbian / Associated Press

Sales tax not stopping Oregon pot shoppers

The Oregonian

PORTLAND — Oregon’s recreational marijuana consumers, at least those who opt to shop in dispensaries, seem to be taking a new state sales tax in stride, many dispensary owners say.

On Jan. 1, after a three-month tax holiday, Oregon imposed a 25 percent sales tax on recreational marijuana sales. The tax will eventually be replaced with a 17 percent state tax once the Oregon Liquor Control Commission assumes control over recreational marijuana sales later this year.

Matt Price, who owns a chain of dispensaries called Cannabliss, said some customers have shrugged off the tax. “And then,” he said, “we have people that say they would rather go back to their ‘guy,’ so to speak, and walk out.”

At Glisan Buds and Foster Buds, general manager Nathan Krytenberg took the radical step of absorbing the tax. Krytenberg is betting on his “strategic decision” to generate enough additional sales to cover the added cost.

He also hopes the gesture builds customer loyalty in a city where more than 100 shops compete not just with each other but with the well-established black market. The company spread its message on social media and lets customers know about it when they come through the doors.

“To be quite honest with you, if we even take a small hit, I believe the fact that we are doing this will put us in a better market position,” said Krytenberg, whose shops sell marijuana for $9 and $15 a gram.

Oregon’s marijuana enthusiasts have historically enjoyed some of the cheapest prices, particularly when compared with Colorado and Washington, both home to taxed and regulated marijuana markets.

Yet even in Portland, where dispensaries routinely compete for recreational dollars by slashing prices on flowers, the move at Glisan Buds and Foster Buds raised eyebrows among other in the industry.

“If you can do it and make any kind of profit, God bless you,” said Sam Heywood, an owner of Farma, a dispensary on Southeast Hawthorne Boulevard where a sign at the entrance reminds customers about the sales tax. “It’s aggressive. Is it sustainable? I don’t know.”

Officials with the Oregon Department of Revenue, the agency charged with collecting the new sales tax, said shops are free to absorb the tax or spread it among the grower, shop and consumer. Ultimately, the agency’s chief interest is ensuring the tax is paid in full.

“We have no authority over pricing,” said Julia Dodson, a spokeswoman for the agency. “Dispensaries can charge whatever they decide.”

The agency won’t begin collecting the tax until February. On Friday, officials said only about half of dispensaries selling recreational marijuana have registered with the Department of Revenue, a state requirement.

At Cannadaddy’s, a dispensary in outer Southeast Portland, owner Brad Zusman said he’s asked the cannabis growers who supply his store about the possibility of sharing some of the tax burden, but the idea hasn’t gone anywhere.

He’s not keen on absorbing the tax on his own since it would represent a major chunk of profits; his store on one day alone this week generated $1,400 in sales taxes, he said.

While he’s determined to attract recreational consumers, Zusman said he’s redoubled his focus on medical marijuana patients, offering bargain-basement prices on popular concentrates.

Recreational shoppers at his store spend, on average, $38 to $45 per transaction, compared with $100 to $110 among medical marijuana patients who don’t pay any tax, he said.

Medical marijuana patients can also purchase pricier concentrates and edibles — sought-after products that remain off limits to recreational shoppers for now.

“It’s really hard for any dispensary to survive just on recreational sales,” he said.