Washington Gov. Inslee signs recreational pot reform law

OLYMPIA – Washington state’s recreational marijuana law has a new tax structure under a measure signed into law Tuesday by Gov. Jay Inslee.

The new law eliminates the current three-tier tax structure and replaces it with a single excise tax of 37 percent at the point of sale – a change sought by the legal-pot industry. To encourage more cities and counties to allow marijuana businesses, the bill directs the state to share pot revenue with jurisdictions that do so. It also allows them to adopt more flexible zoning for where pot grows and stores can be located.

The passage of Initiative 502 in 2012 allowed the sale of marijuana to adults for recreational use at licensed stores, which started opening last year. Earlier this year, the Legislature passed and Inslee signed into law a measure that regulates the state’s medical marijuana system and reconciles the two markets.

The tax structure change is significant for marijuana businesses. Previously, pot shops charged their customers 25 percent as required so they could pass that money along to the state. But because of the way the law was written, they had to pay federal income tax on that money they collected from the customer, even though it didn’t go toward their bottom lines.

The change makes the new 37 percent tax akin to a sales tax, so stores won’t have to report it as income.

Under the new law, starting today, the excise tax is one that everyone would have to pay, both medical marijuana patients and recreational users. However, patients who are in a registry that takes effect in July 2016 created under another bill passed by the Legislature this year would be exempt from sales tax on their purchases. But current collective gardens would get a sales tax exemption up until that time.

The new measure allows counties and cities to reduce the buffer zone around businesses from the current 1,000 feet to as little as 100 feet for recreation and child care centers, public parks or transit centers, libraries and arcades. The 1,000-foot zone would remain in place for schools. The measure also bans marijuana vending machines, marijuana clubs and drive-thru facilities.