Cannabis industry, cities and counties clash over proposed local excise tax

Staff briefed substitute Senate Bill 5,650, a proposal to allow counties to impose an excise tax on cannabis sales of up to 2% (with cities able to impose the tax if the county does not by a statutory deadline). The Liquor and Cannabis Board would collect the tax on behalf of local governments and could retain up to 1% for administrative collection costs. The bill requires voter approval and includes distribution rules for jurisdictions where licensed retailers operate.

Supporters — including city and county associations and some municipal officials — said the change gives local governments additional revenue tools to pay for local impacts from legalization and to support public safety, regulatory costs and services. Paul Jewell of the Washington State Association of Counties said counties are facing deep fiscal pressure and need more revenue options.

Opponents from the cannabis industry, growers and associations argued Washington already has among the highest cannabis tax burdens (a 37% state excise tax plus local levies, cited repeatedly), that raising taxes would push more sales to illicit markets and further destabilize small retailers. Several industry speakers urged tax reform rather than new taxes and pointed to alternative policy bills in the session focused on converting ad‑valorem taxes to more stable structures.

The committee heard a large number of in-person and remote witnesses on both sides; staff did not take a committee vote during the hearing in this transcript.