By Zac Northcutt
July 28, 2020

Demystifying the cannabis industry in Edmond

Our cannabis industry in Oklahoma is heavily taxed while consumers continue to provide ample demand.
Cannabis plants

Believe it or not, Edmond is #1 NATIONALLY in dispensaries per capita. If you compare Denver, CO (the poster-child for pot shops) and Edmond, OK side-by-side, our surprising city has 60% more dispensaries per person!  Denver has more dispensaries in number than Edmond, but each of its dispensaries serves a larger group of medical patients. This sounds like a bad balance of supply and demand, right? Edmond cannabis dispensaries are not closing en masse, and sales reported by the Oklahoma Tax Commission help paint a different picture.

Believe it or not, Edmond is #1 NATIONALLY in dispensaries per capita.

By now it is common knowledge that cannabis (marijuana, pot, weed, etc.) is still illegal under federal law. The Federal Controlled Substance Act (CSA) of 1970 gives classifications to drugs based on medical use, potential for abuse, and safety/dependence liability. Cannabis is currently categorized as a Schedule I substance (the most dangerous). Other drugs in this category are LSD, heroin and Ecstasy. Less dangerous drugs that qualify as Schedule II are cocaine, meth, and oxycodone.

When Oklahoma State Question 788 came up for a vote, groups for the bill were only able to raise $31,629, while those opposing the bill raised $815,632 during the same period. For every $1 spent campaigning for the bill to pass, $25 was spent trying to defeat this effort.  On June 26, 2018, Oklahoma citizens decided to update our laws and allow a state-sponsored medical cannabis program to begin.

For Oklahoma, all sales of cannabis products are charged a 7% gross sales tax in addition to any local and state sales taxes. According to the Oklahoma Tax Commission, the cannabis industry generated more than $55 million in tax revenue in 2019. This is money going directly back into our state!  

The Oklahoma Medical Marijuana Authority (OMMA) controls the licensing for the industry. No cannabis-based business may start conducting business without a license from the OMMA. Like good, law-abiding citizens, Oklahomans rushed to get their licenses. In 2019, the OMMA collected more than $21 million for personal and commercial licenses. This represents individuals and companies that are determined to follow the law and conduct business “above board.”

That’s good news for our state coffers. Our cannabis industry in Oklahoma is heavily taxed while consumers continue to provide ample demand.  Combining all taxes and fees paid by the cannabis industry shows a $76 million windfall for our state in 2019! Using real-time data in 2020, our state sales figures continue to trend as high as . . . the sky.

However, some of our own citizens view this industry as vulgar or illegitimate. That opinion, though inaccurate, is part of the social stigma our cannabis economy must work to overcome. In the meantime, these tax windfalls require no action or payment from those that do not wish to participate. Each dollar generated by our medical cannabis program is a result of legal and voluntary action by our citizens.

As of this writing, no cannabis business may deduct any business expenses against its taxable income. Only costs directly tied into Cost of Goods Sold may be deducted as an expense.  All other industries are permitted to deduct normal expenses (power, equipment, marketing, etc.) against their taxable income. This results in a MUCH higher percentage of corporate taxes paid by the cannabis industry.

How is this possible?  Is this legal?

This argument is found deep in the “Supremacy Clause” in Article VI of the US Constitution.  That clause states that the federal law shall be primary.  However, being a Republic, each state continues to maintain a degree of sovereignty.  Thankfully, the 10th Amendment has a way out of this paradox. 

“The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.” This allows each state to enact laws that best fit the needs of its citizens. Most often, the 10th Amendment is viewed in delegating police powers to the state. This is important because a law without any methods of enforcement will not be followed. State cannabis programs are carefully written to not be in direct conflict with the CSA. For a state cannabis program to be legal, it must not force participants to violate federal law.  Patients have the right to purchase products but are not mandated to (e.g.: terminate a patient account if he or she does not purchase a stated amount of product). A cardholder’s behavior is observed, tracked, and taxed by the state. States have argued that no state program requires its citizens to break the federal law. Instead, the state is merely allowing and regulating the behavior of its citizens that voluntarily decide to engage in state-approved activity.

Because the federal government does not have supremacy on policing and enforcing federal laws, it instead relies on commerce. In the land of Banking, Interstate Commerce, and Taxes our federal government does have supremacy. This is why the cannabis industry does not have adequate access to FDIC banking, interstate trade is severely limited if allowed at all, and the industry pays nearly double the taxes of any business next door.  If the federal government cannot stop the cannabis industry, they will make a profit on it.

For now, Edmond can marvel at the number of available dispensaries in our city. Remember that each dispensary is part of a larger economy that involves growers, processors, transportation, and other business services. Our Edmond cannabis economy is active and devoted to serving its clients while continuing to fully comply with all governing regulations.

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About Zac Northcutt

Zac Northcutt, an Edmond native, received a BBA in Human Resources Management from Baylor University. After working for several years in Dallas, Zac moved his family back home to Edmond to set down roots. Through is career he has managed a wide range of projects from staffing nuclear power plants to navigating international employment law with Poland. His well-versed background has given Zac a unique perspective on a myriad of HR issues. Zac is President of UPsource PEO, a company focused on providing creative business solutions to the cannabis industry.