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Minnesota not collecting as much tax revenue as it could on newly legal THC edibles

Minnesota not collecting as much tax revenue as it could on newly legal THC edibles
Minnesota not collecting as much tax revenue as it could on newly legal THC edibles 02:04

MINNETONKA, Minn. -- At Duke's on 7 in Minnetonka, there are new drinks on the menu: seltzers infused with hemp-derived THC, an offering made possible by a recent law allowing small amounts of the intoxicating chemical that can produce a high in food and drinks.

"I think people are just curious to try them because it just became legal over a month ago," said Luke Derheim, co-owner of Craft & Crew Hospitality, which owns Duke's and other restaurants.

There's a sales tax every time someone buys THC seltzer, pack of gummies or other edibles. But Minnesota is not reaping the full economic benefits of the law because it's not levying excise taxes on the products like it does on alcohol or cigarettes, an analysis from the University of Minnesota Duluth found.

RELATEDTHC edibles, beverages now legal in Minnesota as new law goes into effect

Researchers estimate Minnesota could be missing out on $5 million at minimum and upwards of $46 million in 2023 by not collecting the additional revenue.

"The states that have legalized [THC products] are seeing millions of dollars of benefits in their first year and then more and more over time," said Monica Haynes, director of the Bureau of Business and Economic Research at the university.

The new law, which took effect in July, allows 5 mg of THC per serving and no more than 50 mg per package, doses that are less potent than what's typically offered in states where recreational cannabis is legal. It also mandates some testing and labeling requirements.

Rep. Heather Edelson, DFL-Edina, who authored the law, said she is already working on additional legislation to address further taxation and state regulations.

"It's in an intricate process," she said.

She said there will be a gross sales tax on the products between 2-3%. An excise tax is yet to be determined but will be part of the bill and likely mirror the excise tax on beer, which is similar in potency. Licensing fees will also be included.

But she called the revenue estimates detailed in the study "a stretch."

"I imagine it would be lower," Edelson said, underscoring the difference between Minnesota legalizing hemp-derived THC products and states that have fully legalized recreational marijuana.

A recreational cannabis bill that passed the Minnesota House last year included a 10% gross receipts tax that the Department of Revenue estimated would bring in $66 million in the second year of implementation and close to $100 million in its third year.

"Being that Minnesota has only legalized certain types of THC products that could mean that our revenues would be potentially slightly smaller than those other states," Haynes said. "It's hard to know given that it's so new."

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