Kittitas County’s recreational marijuana sales top $3 million since launch

This report was produced by the students of COM 226: Chris Anderson, Hailey Andreas, Daniel Chavez, Austin Clark, Chelsea Delatorre, Krystal Dudek, Thomas Gracey, Vaughn Jones, Hyein Kang, Mandi Ringgenberg and Tayler Shaindlin.

The recreational-marijuana industry in Kittitas County set a monthly record in April with $550,000 in total sales, according to the latest state figures.

Strong spring sales have propelled total Kittitas County sales to more than $3 million since legal sales began in August, according to numbers released by the Washington State Liquor Control Board in May. The board regulates the state’s recreational marijuana industry.

Twenty-five percent of total sales — $771,000 since August — went to the state in the form of excise taxes. The excise tax is a 25 percent transaction tax levied each time marijuana changes hands from grower to processor to retailer to consumer.

Nearly all sales come from only two of the seven state-licensed businesses in Kitttitas County that are actively selling marijuana: Life Gardens, a marijuana processor and producer, and Cannabis Central, the county’s only retailer.

Life Gardens’ sales follow the sun

Gearing up for another season at @LifeGardens! Proud to have served 300,000 people so far! pic.twitter.com/5nCQ4turhz

— Life Gardens (@LifeGardens) March 25, 2015

In November, shortly after starting business, Life Gardens experienced high sales because of a limited number of competitors in the market, said Matt Begni, Life Gardens’ assistant director. In fact, Life Gardens’ November sales of $348,255 were the highest of 118 active processors in the state.

Its sales have remained near the top every month since then, although they dipped during winter. Life Gardens finished last year No. 8 out of 423 Washington growers, according to the LinkedIn.com profile of Greta Carter, a nationally known marijuana industry consultant, founder of the Cannabis Training Institute and chief executive officer of Life Gardens.

“We did this by claiming 7% market-share our first month at market, maintaining our position as WA’s number one or two producer of usable marijuana by sales volume ever since,” Carter’s LinkedIn profile says.

Begni said Life Gardens’s winter sales were affected by the fact that the outdoor farm did not grow marijuana during the season. Next winter, Life Gardens plans to grow using special greenhouses that will work with their hybrid hydroponic system.

Begni said Life Gardens’ business is on track with expectations.

Cannabis Central sees lower prices, high sales

Sales have been on the rise at Cannabis Central in Ellensburg, the county’s only marijuana retail store.

Following flat sales last year, the state’s figures show a 167 percent rise in monthly sales at Cannabis Central since the end of December.

With a high level of product flooding the market, prices have been trending downward, said Rob Hendrix, who, with his wife, Diane Hendrix, owns Cannabis Central next door to the Red Horse Diner. Lower prices, in turn, have led to increased sales.

After finishing 2014 in the hole, Rob Hendrix said, the business overall is growing and is now “barely” in the black.

Excise tax casts cloud over future growth

Despite recent sales growth, Hendrix said it’s hard to predict the future of the business since no model exists.

“I do know that this is unusual business and an unprecedented business as far as the level of taxation,” Hendrix said.

Hendrix said Washington’s 25 percent excise tax is still a drag on the retailer’s finances. He and his wife must turn over 25 percent of their monthly sales to Washington state. In other words, out of roughly $200,000 in April sales, Washington will take about $50,000 in excise tax straight off the top, leaving the retailer $150,000 from which to pay other taxes, salaries, rent, utilities and its marijuana inventory, among other things.

But that’s not the end of the excise-tax story.

Since the sale of marijuana is still a federal crime, the federal IRS applies different rules to marijuana businesses. Unlike other businesses, marijuana businesses are not allowed to deduct excise taxes.

So Hendrix and his wife must pay income tax as though they sold $200,000 in goods, not its actual sales of $150,000 in goods plus $50,000 in excise tax. In effect, that gives Cannabis Central a significantly higher federal tax rate than other businesses its size.

“If you looked at this business model in this industry right now today and it was stagnant,” Hendrix said, “you’d never get in, you’d never do it.”

Kittitas County hosts 12 licensed marijuana businesses

For the most complete view of the county’s marijuana industry, open the map to a full-screen view. Each license type — producer, processor and retailer — is color-coded. Some licenses hold both a producer and a processor license, so they appear twice on the map.