Alaska House approves marijuana tax reform, advancing bill to Senate

A decade after Alaska voters legalized recreational marijuana, the Alaska Legislature is advancing the first major change to the law that opened commercial sales here.

On Friday, the Alaska House of Representatives voted to change the state’s $50 per ounce marijuana tax to a 7% sales tax.

If House Bill 119 is accepted by the Senate and Gov. Mike Dunleavy, it would impose Alaska’s first statewide sales tax. That pioneering concept troubled some legislators, but the bill still passed the House by a 36-3 vote.

The tax change was recommended by the state’s recreational marijuana task force, which Dunleavy convened in 2022 to analyze the marijuana industry and determine whether aspects of the industry’s enabling law — passed by voters in 2014 — should be changed.

Ten years ago, Alaska joined Oregon as the third and fourth states to legalize recreational marijuana use. Since then, many other states have followed suit, but Alaska’s marijuana tax — levied at the wholesale level — is the highest in the country.

Members of the marijuana industry have asked for tax relief, saying that they are unable to successfully compete with black-market marijuana at present rates of taxation. 

In addition, there are signs that the tax structure is counterproductive. The $50 per-ounce tax applies only to regular bud or flower; there are lower taxes for flawed buds or for trim — cut marijuana buds — and producers have shifted toward those lower-taxed products.

The task force’s original recommendation was a 3% sales tax, but bill supporter Rep. Jesse Sumner, R-Wasilla, said he believed that figure was too low and would not get legislative support. He proposed a 10% tax that was later lowered to 6%. On the House floor, that was raised by amendment to 7%. 

Sumner said he believes the higher figure may make the bill more attractive to the state Senate, which must vote on the bill before it can advance to the governor’s desk.

Ryan Tunseth, president of the Alaska Marijuana Industry Association, a trade group, said he was excited to see the bill pass the House, even with a tax rate higher than preferred by the industry.

He said he intends to poll marijuana businesses over the weekend to get their impressions, and he hopes that the final version of the bill will also include other task force recommendations, including changes to plant tracking and licensing.