Early numbers show legal pot really is big biz

Some unprecedented and historic financial data is finally come to light from the nation's massive and previously underground cannabis industry.

Thursday is the tax deadline for Colorado's new recreational marijuana businesses to report to the state's Department of Revenue. And while those results won't be made public for several months, new projections reveal what some cannabis industry observers had expected: legalized marijuana sales are creating financial windfalls.

A new budget proposal submitted by Colorado Gov. John Hickenlooper says his state's legal cannabis industry will bring in a larger-than-expected $133.6 million in taxes and revenues for fiscal year 2014-15.

 

Bringing legalized marijuana to the masses
 Colorado legalized medical marijuana years ago, but these new projections are the first figures to be released since Jan. 1, when the state also legalized recreational sales.

Washington State also legalized recreational marijuana earlier this year. And an official forecast expects cannabis-related sales taxes, along with excise and licensing fees, to bring the state nearly $190 million in revenue between 2015 and 2019.

The Colorado budget proposal does warn, however, that its projections could change as more data are collected and that the final revenue figures could fall short of what analysts are expecting.

"It is important to note that these amounts are estimates based on a number of assumptions of the new industry," says the governor's letter, "including consumption patterns, market price, the number of retail stores entering the market, and other economic and control variables."

Colorado imposed heavy taxes on recreational marijuana sales -- a 10 percent sales tax plus an additional 15 percent excise tax -- and The Denver Post estimates overall cannabis sales in Colorado will come in at around $1 billion for the fiscal year, or about 50 percent above previous expectations.

"It goes to show there's a pretty big market out there," says Mac Clouse, a professor of finance at the University of Denver's Daniels College of Business. "This is the first real, legitimate way we can get evidence as to just what that size of the market is."

 

Insurance business growing alongside marijuana boom
 And given that Colorado has been the cannabis industry's "test bed," especially when it comes to state regulation, Clouse isn't surprised by the large sales numbers reported by recreational marijuana stores. "You've got a lot of the new product shopping that would go on with any new product that you put in front of consumers," he notes.

Along with the curiosity factor, he says, there's also an array of new, nonsmokable products available to consumers, including marijuana-laced edibles and sparkling drinks.

"What I've found surprising is the sophistication of the industry," he adds, "the research and development that they're putting into those products."

Clouse figures other states are watching Colorado's cannabis industry very closely to determine just how much revenue it's actually generating and whether they, too, can apply this regulatory template.

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