Legal Buyers Pay a Premium for Marijuana in Colorado

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Colorado has become a proving ground for legalized marijuana in the United States. At least 37 stores across the state began selling the drug for recreational use on January 1, and like the launch of a new Apple product, retailers are already reporting they can’t keep up with demand.

There’s a lot of waiting to do before a meaningful amount of data is generated about the social and economic impact of the state’s marijuana law. By this time next year, expect analysis of the tax revenue generated by marijuana production and sales in Colorado and plenty of speculation on which state will be next (Washington, you’re on deck!). Until then, would-be recreational marijuana market watchers have little official data to work with.

Reports from opening day in Colorado indicate that weed was sitting on the shelf for between $14 and $20 per gram before sales tax of approximately up to 20 percent. Perhaps the most common quantity purchased is an eighth of an ounce, or 3.5 grams. The average price for a legal eighth of weed in Colorado was reported by Marijuana.com to be about $64.

This is expensive compared to medical marijuana, which sells for between $25 and $45 for an eighth. Part of this is because of the multilayered tax system for recreational marijuana, and part of it is simply a premium that certain brands and strands can command in the market.

It’s not a hard-and-fast sort of classification, but like alcohol, a consumer can pay a different amount for top-shelf or bottom-shelf marijuana. Many pot shops in Colorado carry custom or premium strains but in limited supply, which means increased prices or sales rationing in the face of high demand.

This is also expensive compared to prices on the street as recorded by PriceOfWeed.com, which crowd-sources marijuana prices. According to the site’s data, medium-quality weed sells on the street in Colorado for an average of $197.45 per ounce, or about $7 a gram and $24.50 for an eighth.

Marijuana in Colorado is subject to a 15 percent excise tax “on the average market rate” and a 15 percent sales tax that stacks with the 2.9 percent state sales tax. The first $40 million in revenue generated from the excise tax will go toward school construction. Marijuana sales in 2014 are projected to hit $400 million in the state.

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