Cost of administering marijuana tax escalating

marijuana taxes

marijuana taxes

SALEM — The costs of administering Oregon’s recreational marijuana tax have escalated since initial estimates in 2015, and may be poised to increase again.

In part, that’s because it’s not yet clear just how much it will cost to build a secure, five-station payment area in the Oregon Department of Revenue.

The project, department officials say, is intended to accommodate the cash tax payments characteristic of the marijuana industry, which due to federal law is largely excluded from mainstream banking services. Many retailers make their monthly payments in cash and in person, and right now they use another area of the revenue building that was renovated for temporary cash handling.

The tax has proven a considerable windfall for the state, bringing in more than $60 million in revenue in 2016. But it has also created complications for the state’s tax-collecting agency.

Special equipment

Administering the marijuana taxes, the department says, requires special equipment and staff to count money and guard against funny business ­— all of which costs money.

In early 2016, for example, the department estimated that it would cost $5,699 to buy air purifiers to mitigate the odor of marijuana that officials say emanates from some cash payments.

The costs to the department of administering the tax is paid for by marijuana tax revenues.

A request for proposals from contractors to renovate the Department of Revenue’s building in Salem closes today, the second bid for the project. An initial bid was put out earlier this year, but the bids received didn’t meet the department’s criteria, a spokeswoman said.

Because the project was still out for bid today, it was not known what the final costs will be, according to department officials.

In October 2015, the department estimated the five-station payment area would cost anywhere between $480,000 and $1.07 million to build, state records show. In 2016, department officials said they expected the project would land somewhere in the middle of that range, at about $787,000.

Costs rise

The administrator for the department’s administrative division, Shawn Waite, told lawmakers during budget hearings last week that the cost of construction of the payment center was expected to exceed initial estimates in 2015 due to inflationary construction costs, but could not provide an estimate of the increase as the project was still out for bid.

The bulk of the work is expected to be finished in October, and complete in November, according to the request for bid proposals; department officials initially expected it would be complete by June 30, Waite said.

Waite said the department initially struggled with the complexity of the construction project and the building’s existing architecture. But Waite also told lawmakers she believed the department hired a private third party to provide counsel on the project, and that the Department of Revenue worked with the Department of Administrative Services’ building management officials.

A Department of Revenue spokeswoman said the October date has been the expected completion date for a year and a half, and that it took longer than expected for the department to decide on a location. Waite said that they had considered building a structure off-site.

The project is forging ahead despite the uncertainty around whether state recreational marijuana laws will face enforcement from the administration of President Donald Trump. Jeff Sessions, Trump’s attorney general, has vocally opposed legalizing marijuana, which under federal law is considered a Schedule-I controlled substance.

Waite told lawmakers last week that there have been no problems or security incidents with the so-called “temporary” arrangement thus far — begging the question of why a new payment center is necessary if the current method has worked without apparent incident.

Asked that question, a spokeswoman for the department said in an email that the size and location of the current arrangement wasn’t “ideal long-term” for safety, security, convenience and “effectively handling cash payments.”

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