As you might be aware, in 2000 Hawaii enacted a medical use of marijuana law (Act 228, Session Laws of Hawaii 2000). The problem, of course, has been how to get this medical marijuana to those who need it without violating other laws. This year our Legislature is working on House Bill 321, which would establish standards for and regulation of medical marijuana dispensaries.

The bill started off in the House, and was referred to three committees: Health, Judiciary, and Finance. It passed all three and went over to the Senate. The Senate referred the bill to four committees, Health, Public Safety, Judiciary and Labor, and Ways and Means.

After the first two committees, the bill was still a regulatory bill. It then was heard by Judiciary and Ways and Means jointly, and those committees amended the bill by, among other things, adding two sections. One creates a special general excise tax rate for retail marijuana sales with a rate of 10 percent. The other imposes a GET surcharge on the same sales. That rate is 15 percent. So here we have a magically appearing levy: Instead of a rabbit coming out of the hat, we get a hefty new 25 percent tax.

But that’s not the whole story; the impact to customers will be quite a bit more. Retailers pass along the GET to their customers, and that amount becomes part of the retailers’ revenue and is taxed again. So if I sold you a ukulele for $100, added tax of $4.50, and you bought it for $104.50, my tax would be 4.5 percent of $104.50, which is more than the $4.50. That’s why most retailers on Oahu pass along 4.712 percent, because 4.5 percent of $104.71 is $4.71, and the retailer then gets the original sales price of $100 after tax.

But guess what happens if the tax rate is 25 percent and the sale is in Honolulu? What would you have to pass on to get the original sales price of $100? The answer is: 34.228 percent! Imagine any customer seeing that kind of tax on the bill.