Christine Green
New Member
It's like forecasting early gold reserves in the heady days of California's Gold Rush era. Revenue estimates that will come from legalizing marijuana are growing almost like weed itself.
In analyzing the ballot initiative to legalize recreational use of marijuana, California's legislative analyst and finance director estimates that legalizing marijuana for casual use could net as much as $1 billion in new tax revenue for the state and local governments.
That estimated revenue, however, dwarfs the amount calculated by the state's tax board, the Board of Equalization, based on legal medical marijuana-related sales.
The tax board reported $570 million in taxable income in 2014, amounting to $49.5 million in taxes owed to the state from sales generated by the 1,623 medical marijuana dispensaries that registered with the state and filed taxes in 2014.
The problem, according to experts, is that of much of the industry is still underground due to conflict in federal and state laws. Hiding makes it nearly impossible for state and local municipalities to collect revenues. And then there are the illegal drug sales, which supporters say the ballot initiative would help to further eat away at illegally gained earnings.
"The reality is, so much of it is underground it's hard to find. Dispensaries have operated in a gray zone for so long that reporting is really fragmented," said George Runner, member of the State Board of Equalization. "On top of it, federal law doesn't allow businesses to have bank accounts, so it's a very big problem in terms of auditing and audit trails."
Federal ban
The fact that marijuana is still illegal under federal law has made many business owners slow to register their businesses, Runner said. They're afraid of potential self-incrimination
The BOE office estimated that if sales of medical marijuana were in full compliance under current law, the state tax board would have collected $111.4 million in 2014. The lack of paper trail led state legislators, including Assemblyman Scott Wilk (R-Santa Clarita), to introduce a joint resolution (AJR 25) last year calling on the President and Congress of the United States to support legislation that will allow banks and credit unions to perform financial services for marijuana businesses.
Asked if he could estimate the percentage of tax revenue the tax board is unable to capture, Runner said the industry was so fragmented in California that he was unable to even make a guess.
"If you don't know what the potential is, you don't know what potential is missing," he said. "Hopefully that all gets resolved to a great degree when the regulatory system is put in place."
The California Growers Association estimates there may be 40,000 independently owned businesses in total in the cannabis industry, with a few thousand of the businesses owning and operating multiple sites, said Hezekiah Allen, executive director for the association. Based in Sacramento, the group has 550 members in more than 45 counties. It compiled data from three sources, including the BOE, to arrive at that number.
"Everything is our best guess and should not be reported as conclusive," Allen said. "We did our best to put numbers to it, but look forward to being proven wrong once better data is available."
Revenue Forecasts
In February, ArcView Market Research released a report predicting that nationally the legal cannabis industry will grow to nearly $22 billion in total annual sales by 2020 — just some three-plus years away. That revenue figure would jump to $37 billion if the federal government legalized marijuana nationwide.
The legal marijuana industry is expected to out-earn the U.S. Film industry, organic foods industry, and more than triple the revenues of the National Football League combined, the report concluded. The ArcView Market Research report has been produced by cannabis investor network, ArcView Group.
Marijuana products sold for recreational purposes could out-sell medicinal marijuana as soon as 2018, according to the 2016 Marijuana Business Factbook, published by Marijuana Business Daily. It expects the total economic impact of the industry to reach $44 billion by 2020, up from $14 billion to $17.2 billion in cannabis sales that will be rung up this year.
Whichever industry revenue total one references, for each dollar spent at retail, the Factbook estimates that an additional $3 of economic activity will occur in local communities where the industry is active. In all, revenue growth is driving investor appetites.
But, in California the task of capturing sales revenue is going to become an even bigger one when under the new law when distribution centers will be allowed. Picture the Amazon of weed. Marijuana products will go in to those centers, be identified, inventory tracked, and then sent out to dispensaries throughout the state. All very similar to how cigarettes and alcohol are managed, Runner said.
Investors
To put marijuana in perspective, the Factbook pegs estimated annual cannabis sales would come in second only to beer sales in the U.S., with sales of wine, organic foods, chocolate and craft beers following cannabis sales. Currently, most of the market value is realized on the black market and isn't taxed, it reports.
Fueling the industry's growth, the report also notes that more outside capital than ever is flowing into the industry. The portion of new companies backed primarily with founders' own savings and debt is at its lowest point ever, 72 percent, while nearly half of investors in privately held companies plan to invest at least $10 million each in 2016. Another study by CB Insights reports that marijuana businesses landed $215 million in venture capital investments last year, more than double the $97 million they secured in 2014.
MadMen, a cannabis management consultancy in Los Angeles, raised $15 million from venture capital investors in April. Meadow, a software company that connects medical marijuana patients with dispensaries who deliver in the Bay area, raised $2.1 million. But like the heyday of the early days of the tech-boom and later the rush to fund start-ups, the industry may eventually settle down when the novelty wears off.
Business Normalization
When Oregon allowed recreational cannabis sales last October, it saved medical marijuana dispensaries which had been on the verge of collapse due to over-saturation of the market, reported the Marijuana Business Daily. The Oregon Retailers of Cannabis Association estimated that revenues from recreational sales hit $11 million the first six days of sales.
Early adopters getting into the retail marijuana sales initially made big profits, about as big as the risks they took. But, as documented in states like Colorado and Oregon where the sheer number of medical marijuana outlets in some locales began cannibalizing sales of one another, industry figures may indicate wealth, but not everyone in the industry is rich.
"It's important to realize the average net household income for a cannabis farming household is about 10 percent lower than the average farming household," said Allen from the California Growers Association.
In the end, once legal and regulated, cannabis may become like any other business. Only the strongest survive.
Marijuana for sale is kept in jars for customers to sample smells, at a recreational marijuana store, in Aurora, Colo. Colorado's pot tourists are in line to be able to buy as much weed as residents, according to a bill moving through the state Legislature. The measure repeals Colorado's unique-in-the-nation tiered purchasing system for marijuana. All adults over 21 in Colorado are allowed to possess an ounce of marijuana, but retail pot shops can't sell more than a quarter ounce in one day to people without Colorado IDs.
News Moderator: Christine Green 420 MAGAZINE ®
Full Article: Special Report: Cannabis Returns Could Top the Earnings of Three Industries Combined
Author: Jana Adkins
Contact: info@signalscv.com
Photo Credit: Associated Press photo
Website: The Santa Clarita Valley Signal - Breaking News, Local News & Multimedia
In analyzing the ballot initiative to legalize recreational use of marijuana, California's legislative analyst and finance director estimates that legalizing marijuana for casual use could net as much as $1 billion in new tax revenue for the state and local governments.
That estimated revenue, however, dwarfs the amount calculated by the state's tax board, the Board of Equalization, based on legal medical marijuana-related sales.
The tax board reported $570 million in taxable income in 2014, amounting to $49.5 million in taxes owed to the state from sales generated by the 1,623 medical marijuana dispensaries that registered with the state and filed taxes in 2014.
The problem, according to experts, is that of much of the industry is still underground due to conflict in federal and state laws. Hiding makes it nearly impossible for state and local municipalities to collect revenues. And then there are the illegal drug sales, which supporters say the ballot initiative would help to further eat away at illegally gained earnings.
"The reality is, so much of it is underground it's hard to find. Dispensaries have operated in a gray zone for so long that reporting is really fragmented," said George Runner, member of the State Board of Equalization. "On top of it, federal law doesn't allow businesses to have bank accounts, so it's a very big problem in terms of auditing and audit trails."
Federal ban
The fact that marijuana is still illegal under federal law has made many business owners slow to register their businesses, Runner said. They're afraid of potential self-incrimination
The BOE office estimated that if sales of medical marijuana were in full compliance under current law, the state tax board would have collected $111.4 million in 2014. The lack of paper trail led state legislators, including Assemblyman Scott Wilk (R-Santa Clarita), to introduce a joint resolution (AJR 25) last year calling on the President and Congress of the United States to support legislation that will allow banks and credit unions to perform financial services for marijuana businesses.
Asked if he could estimate the percentage of tax revenue the tax board is unable to capture, Runner said the industry was so fragmented in California that he was unable to even make a guess.
"If you don't know what the potential is, you don't know what potential is missing," he said. "Hopefully that all gets resolved to a great degree when the regulatory system is put in place."
The California Growers Association estimates there may be 40,000 independently owned businesses in total in the cannabis industry, with a few thousand of the businesses owning and operating multiple sites, said Hezekiah Allen, executive director for the association. Based in Sacramento, the group has 550 members in more than 45 counties. It compiled data from three sources, including the BOE, to arrive at that number.
"Everything is our best guess and should not be reported as conclusive," Allen said. "We did our best to put numbers to it, but look forward to being proven wrong once better data is available."
Revenue Forecasts
In February, ArcView Market Research released a report predicting that nationally the legal cannabis industry will grow to nearly $22 billion in total annual sales by 2020 — just some three-plus years away. That revenue figure would jump to $37 billion if the federal government legalized marijuana nationwide.
The legal marijuana industry is expected to out-earn the U.S. Film industry, organic foods industry, and more than triple the revenues of the National Football League combined, the report concluded. The ArcView Market Research report has been produced by cannabis investor network, ArcView Group.
Marijuana products sold for recreational purposes could out-sell medicinal marijuana as soon as 2018, according to the 2016 Marijuana Business Factbook, published by Marijuana Business Daily. It expects the total economic impact of the industry to reach $44 billion by 2020, up from $14 billion to $17.2 billion in cannabis sales that will be rung up this year.
Whichever industry revenue total one references, for each dollar spent at retail, the Factbook estimates that an additional $3 of economic activity will occur in local communities where the industry is active. In all, revenue growth is driving investor appetites.
But, in California the task of capturing sales revenue is going to become an even bigger one when under the new law when distribution centers will be allowed. Picture the Amazon of weed. Marijuana products will go in to those centers, be identified, inventory tracked, and then sent out to dispensaries throughout the state. All very similar to how cigarettes and alcohol are managed, Runner said.
Investors
To put marijuana in perspective, the Factbook pegs estimated annual cannabis sales would come in second only to beer sales in the U.S., with sales of wine, organic foods, chocolate and craft beers following cannabis sales. Currently, most of the market value is realized on the black market and isn't taxed, it reports.
Fueling the industry's growth, the report also notes that more outside capital than ever is flowing into the industry. The portion of new companies backed primarily with founders' own savings and debt is at its lowest point ever, 72 percent, while nearly half of investors in privately held companies plan to invest at least $10 million each in 2016. Another study by CB Insights reports that marijuana businesses landed $215 million in venture capital investments last year, more than double the $97 million they secured in 2014.
MadMen, a cannabis management consultancy in Los Angeles, raised $15 million from venture capital investors in April. Meadow, a software company that connects medical marijuana patients with dispensaries who deliver in the Bay area, raised $2.1 million. But like the heyday of the early days of the tech-boom and later the rush to fund start-ups, the industry may eventually settle down when the novelty wears off.
Business Normalization
When Oregon allowed recreational cannabis sales last October, it saved medical marijuana dispensaries which had been on the verge of collapse due to over-saturation of the market, reported the Marijuana Business Daily. The Oregon Retailers of Cannabis Association estimated that revenues from recreational sales hit $11 million the first six days of sales.
Early adopters getting into the retail marijuana sales initially made big profits, about as big as the risks they took. But, as documented in states like Colorado and Oregon where the sheer number of medical marijuana outlets in some locales began cannibalizing sales of one another, industry figures may indicate wealth, but not everyone in the industry is rich.
"It's important to realize the average net household income for a cannabis farming household is about 10 percent lower than the average farming household," said Allen from the California Growers Association.
In the end, once legal and regulated, cannabis may become like any other business. Only the strongest survive.
Marijuana for sale is kept in jars for customers to sample smells, at a recreational marijuana store, in Aurora, Colo. Colorado's pot tourists are in line to be able to buy as much weed as residents, according to a bill moving through the state Legislature. The measure repeals Colorado's unique-in-the-nation tiered purchasing system for marijuana. All adults over 21 in Colorado are allowed to possess an ounce of marijuana, but retail pot shops can't sell more than a quarter ounce in one day to people without Colorado IDs.
News Moderator: Christine Green 420 MAGAZINE ®
Full Article: Special Report: Cannabis Returns Could Top the Earnings of Three Industries Combined
Author: Jana Adkins
Contact: info@signalscv.com
Photo Credit: Associated Press photo
Website: The Santa Clarita Valley Signal - Breaking News, Local News & Multimedia
