Maine's Legislature Proposes Progressive Marijuana Production Tax

Most state regulators tax marijuana producers based on the quantity or a fixed rate applied to the square footage of the canopy growth. Maine wants to change this approach. Maine’s Committee on Taxation will hold a public hearing on Thursday, April 18th, 2019 on a bill that will charge marijuana producer’s 15% of the average market price that is determined by the state. The tax will not apply to vertically integrated marijuana producers.

Maine’s approach is novel. The industry can benefit from a transparent market prices. We are most concerned about the transparency and fairness of the approach used to generate the average market price, and the likelihood of manipulation. The legislation states that the department will determine an average quarterly market price for flower, trim, immature plants and seeks. The bill fails to address how the average market price is calculated per category including the look back period; the initial pricing used to create the average market price; how changes in local conditions are incorporated; and how the producers use the average market price to assess taxes to be paid. These details should be provided so that producers can adequately assess the changes to cash flow, the certainty of which a flat rate provides.