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HB 3400 limits a local tax on “the sale of marijuana items” to 3 percent and provides that a city <br />may not otherwise adopt or enact an ordinance imposing a tax or fee on “the production, <br />processing or sale of marijuana items.” Although ORS 475B.345 preempts certain local taxes <br />and fees, a city may be able to continue to impose taxes and fees of general applicability, which <br />are not specific and limited to marijuana businesses, without being subject to the 3 percent limit. <br />Cities considering imposing such a tax or fee should obtain their city attorney’s advice before <br />doing so. <br />If my city adopts a ban for some—but not all—marijuana activities, can it still impose a <br />local tax on those activities not banned? <br />Probably not. ORS 475B.800(5) broadly provides that a city that adopts a ban under ORS <br />475B.800 prohibiting one or more marijuana activities within its jurisdiction “may not impose a <br />local tax or fee on the production, processing or sale of marijuana or any product into which <br />marijuana has been incorporated.” <br />STATE TAX <br />What is the state going to tax and in what amount? <br />Under ORS 475B.700, the state will impose a 17 percent tax on the retail sale of marijuana <br />items, including marijuana leaves and flowers; immature marijuana plants; marijuana <br />concentrates and extracts; marijuana skin and hair products; and other marijuana products. <br />Early sales of recreational marijuana from medical marijuana dispensaries, however, will be <br />taxed at a higher rate. Starting January 4, 2016, early sales of recreational marijuana from a <br />medical marijuana dispensary will be taxed at a rate of 25 percent. <br />How much of the state tax revenues will go to cities? <br />Ten percent of the state marijuana tax revenues will be distributed to cities that do not adopt <br />ordinances prohibiting the establishment of marijuana facilities registered and licensed by the <br />2 <br />state.The revenue will be distributed to cities “\[t\]o assist local law enforcement in performing <br />its duties” under Measure 91. <br />Early figures indicate that retail sales of marijuana have exceeded expectations, but insufficient <br />information is available upon which one can draw any reasonable conclusions as to what actual <br />dollar amounts might be available for distributionto cities. While preliminary revenue numbers <br />have been described in popular media, very little information has been made available relating to <br />the costs incurred by the State of Oregon in the administration and enforcement of ORS 475B. <br />How will the state tax revenues be distributed to cities? <br />Until July 1, 2017, the state tax revenue dedicated to cities will be distributed proportionately <br />based on population to those cities that do not adopt prohibiting ordinances. After July 1, 2017, <br />those revenues will be distributed proportionately based on the number of recreational licenses <br />issued for premises located in each city. Fifty percent of the revenue for cities will be distributed <br />based on the number of recreational grower, processor and wholesale licenses issued for a <br />2 <br />The remaining revenues will be distributed as follows: 40 percent to the Common School Fund; 20 percent to the Mental Health <br />Alcoholism and Drug Services Account; 15 percent to the State Police Account; 10 percent to counties; and 5 percent to the <br />Oregon Health Authority. <br />Frequently Asked Questions About Local Regulation of Marijuana 7 <br />May 24, 2016 <br /> <br />