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What is the Demand for Marijuana in Washington DC?

Although medical and recreational marijuana are legal in the District of Columbia, federal congressional oversight has prevented the full implementation of the state’s adult-use cannabis program. However, an informal gift economy has arisen to enable the distribution of recreational marijuana because it is legal to gift up to 1 ounce of marijuana to another person in DC.

While the sale of recreational marijuana remains contentious in DC, the District already has a thriving medical marijuana program. There are DC-licensed dispensaries that distribute medical marijuana to registered medical patients and caregivers. As of March 2023, there are 28,833 patients, 88 caregivers, and 650 healthcare providers registered in Washington DC’s medical marijuana program. In that month, some 6,555 registered patients who are residents of DC purchased medical marijuana while 3,307 non-residents crossed the border into the District to buy medical marijuana, as allowed by DC’s marijuana reciprocity. The report published by the DC Alcoholic Beverage and Cannabis Administration (ABCA) showed that total medical cannabis sales for March 2023 was $1.82 million for residents and $1.17 million for non-residents.

While there’s a growing demand for medical marijuana in DC, there are strong indications that its recreational marijuana market is even bigger. In a Statista's Survey on Marijuana use among US adults by state 2018-2019 conducted in DC, an estimate of 27.42% of the respondents (around 70,000) aged 18 years and older consume marijuana. Consumers of marijuana in DC mostly privately cultivate them or get them through gifting services. These gifting services offer marijuana as complimentary gifts, accompanying the purchase of items like rolling papers, ashtrays, artworks, and t-shirts. Residents of DC also get marijuana by attending "pop-up" events that are advertised on social media platforms by different vendors. Typically, the vendors keep the postings secret, which makes interested persons send direct messages to the hosts to find out the actual location of the events. All these make it even more difficult to measure the demand for marijuana in Washington D.C.

While recreational marijuana has been legalized in DC, the lack of a framework to allow its sale makes it difficult to estimate the demand for it. However, it is clear that this blockage is causing the DC government to lose millions in tax revenues from a potentially big adult-use cannabis market.

How is Marijuana Taxed in Washington DC?

The District of Columbia has a 6% sales tax on medical marijuana sales. DC expanded its medical marijuana program with the Medical Cannabis Amendment Act of 2022. Signed into law in January 2023, this Act removed the cap on the number of medical marijuana facilities, allowed adults aged 21 years and older to self-certify for medical marijuana, and established an annual sales tax holiday between April 15 and 24. During this period, DC’s 6% sales tax is waived on all medical cannabis purchases.

With the US Congress blocking recreational marijuana sales in Washington DC, the District cannot tax adult-use marijuana gifting services. While the tax system for marijuana in Washington D.C. is yet to be structured, there have been a number of proposals on how the District’s recreational marijuana sales should be taxed. The Comprehensive Cannabis Legalization and Regulation Act of 2021 proposes a 13% cannabis excise tax on gross receipts from charges and sales for retail marijuana or marijuana products tax. 30% of the tax revenue generated will be allocated to support individual social equity program applicants. The Safe Cannabis Sales Act of 2021 also proposes a 17% sales tax, which will be used to promote business start-ups. It will create a new license category for microbusiness and third-party social equity delivery services. Funds generated from the sales of cannabis would also be used to finance organizations in wards 7 and 8, including women and minority-owned small businesses like restaurants, small grocery stores, and public school after-school programs.

What is the Agency Taxing Marijuana Business in Washington DC?

Although there is no tax system for marijuana in Washington D.C., the Office of the Chief Financial Officer (OCFO) is the agency that manages taxation in Washington D.C.. It was created to function under the Financial Control Board by the District of Columbia Financial Responsibility and Management Assistance Act of 1995 and approved on April 17, 1995. The Chief Financial Officer manages the OCFO. The OCFO also oversees the finances of the District, which includes:

• Tax and revenue administration

• The treasury, comptroller and budget offices

• Economic/fiscal analysis and revenue estimation functions

• Agency financial operations

• The DC Lottery

The Office of the Chief Financial Officer carries out the following responsibilities:

• It operates and maintains an organized financial management system to budget, control, collect, and properly account for more than $7 billion in yearly operating and capital funds.

• It oversees and directly supervises the financial and budgetary functions of the District government.

• The OCFO manages and enforces the District's tax laws, collects revenue for the city, and records deeds and other written instruments affecting a title, right, or interest in real or personal property in the District.

• It develops, implements and monitors the District's accounting systems and policies and produces the audited Comprehensive Annual Financial Report for the city.

• It prepares the city's annual budget, represents the District in the federal appropriations process, and monitors budget performance during the fiscal year.

• The OCFO borrows on behalf of the District, collects receipts, payments, and transactions for the District, and invests the city's funds.

• It forecasts revenue for the District government, performs tax expenditure analysis, develops fiscal impact statements for proposed legislation, and advises the Financial Control Board on economic development matters.

The contact details of the Office of the Chief Financial Officer is as follows:

1350 Pennsylvania Avenue,

Northwest, Suite 203,

Washington, DC 20004

Phone: (202) 727-2476

Fax: (202) 727-1643

TTY: 711

Email: ocfo@dc.gov