The state Liquor Control Board has put an end to recreational marijuana stores bundling their pot with pipes and other items, effective immediately.
Through bundling, stores charged slightly above cost for marijuana and coupled the pot with a pipe or lighter, which were sold at a much higher price than normal. The practice allowed stores to cut down on excise taxes paid on marijuana, which helped them reduce consumer prices.
Ramsey Hamide, owner of Main Street Marijuana, said that has been the case at his store.
“The bundling allowed us to allocate revenue towards paraphernalia and reduce the price of the weed to the consumer by reducing the excise tax obligation,” Hamide said. “What smart business in the world wouldn’t follow the guidelines as given to reduce tax obligations legally and give consumers a lower price?”
A group of stores around the state had been using the practice, although Main Street Marijuana was the only one in Clark County.
Brian Smith, a spokesman for the Liquor Control Board, said the issue had been discussed several times in the agency’s enforcement meetings.
He said it’s essentially a work-around to avoid paying state taxes, and it’s not allowed.
“Some retailers were complaining that their competitors were doing that, and those stores didn’t want to risk their licenses on something that was not legal,” Smith said.
As to how many stores were bundling, it was “more than a handful,” Smith said.
The rule change was made Wednesday.
Hamide said the price of a few of his store’s products will increase because without bundling the current prices would force them to sell some strains at a loss. Most of the store’s inventory won’t be affected, he added.
Hamide also said he thinks the new rule will be overturned.
“I already know of at least one retailer who is working on filing an emergency injunction in the coming days,” Hamide said. “We believe their ruling will get overturned and the courts will find bundling to be a perfectly legal and acceptable business strategy. The (rules) just say we can’t sell for below acquisition costs, and now the LCB is trying to dictate how much we can sell product for and how we are allowed to sell it.”
Whether the rule change holds or not, it brings to the forefront the larger issue of taxes. The state charges a 25 percent excise tax at three stages between grower, processor and store, which many in the industry see as excessive. And those taxes have made it a struggle for stores to compete with the black market, Hamide said.
Beyond that, recreational marijuana businesses also can’t deduct a lot of their expenses federally because of the illegal Schedule I status of marijuana at the federal level.
