High Prices for Getting High Expected as Colorado Opens Legal Pot Shops

Demand likely to outstrip supply at first as Colorado opens legal marijuana boutiques.

Employees roll joints behind the sales counter at Medicine Man marijuana dispensary, which is to open as a recreational outlet at the start of 2014, in Denver, Friday Dec. 27, 2013.

Employees roll joints at the Medicine Man marijuana dispensary in Denver, as it prepares to open as a recreational outlet.

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On Jan. 1, the first legal recreational marijuana outlets will open in Colorado. And with the rise of the new legal marijuana industry comes the question of what newly legal recreational weed should cost.

As it turns out, new users might be best advised to wait a few months before buying their weed. Some experts and store-owners say that getting high in the mile high state will likely be expensive at first, with prices easing off as the supply of weed catches up to the demand from Americans hoping for their first chance to buy recreational marijuana legally.

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"I do expect the price to go up at least for the first few months," says Rachel Gilette, an attorney at Colorado's chapter of the National Organization for the Reform of Marijuana Laws. "That's only because the supply is going to be very limited and the demand has just jumped massively."

Medical marijuana is already legal in Colorado, and many of the new shops will be medical dispensaries that have also obtained retail licenses. In some of those stores, retailers will set aside marijuana for medical patients, separate from that for casual users.

 

"I did talk to a retailer yesterday who had just set his price points, and they were about double of what you have been able to get medical on the market for the last year," says Gilette. "So it is going to be more expensive at least for the foreseeable future."

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Even leaving demand aside, taxes will already push prices up for retail buyers. The state will impose total taxes of 25 percent on marijuana plus the regular 2.9 percent state sales tax, and local taxes will also apply on top of those. At Kine Mine, a store in the small town of Idaho Springs, for example, total taxes will come to 31.9 percent – 27.9 percent in state taxes plus 1 percent in county taxes and a 3 percent city tax, according to store founder Theran Snyder.

But he expects he may have to charge recreational users even further above and beyond his medical marijuana prices to stay stocked. Medical marijuana patients can designate a dispensary as their primary center and thus become "members," who typically pay less than non-members. At the Kine Mine, a nonmember will currently pay $225 per ounce for medical marijuana. Though Snyder declines to give exact price points, he believes he may have to charge far more than $225 per ounce for non-medical marijuana to ensure that product stays on the shelves when the new law kicks in.

"Obviously the way we're planning on controlling our inventory is with price, and unfortunately that means we're going to be charging a premium," says Snyder.

At Lightshade, a store with locations in Denver and Aurora, the outlook is likewise uncertain.

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"We're not exactly sure [where prices will go]. We're anticipating obviously a rush of people coming from out of state," says William, a store manager who declined to give his last name. He says the store may decide to raise prices for recreational users if they see enough demand. "We do want to keep product for our medical patients. They do come first."

William currently thinks Lightshade will charge recreational customers the higher, non-member medical marijuana prices. According to its website, Lightshade currently charges $280 per ounce for members and $320 for non-members for its highest-priced marijuana. But there's no way to precisely predict what demand will look like, he adds.

"I think [prices] could definitely fluctuate dramatically," William says, adding that it's possible he's overestimating how high initial demand will be at his store.

Some stores are fearing shortages of supply despite sales caps that were set as a part of the state's new marijuana law. Colorado residents will be allowed to buy up to one ounce per transaction, and out-of-staters will only be allowed to buy a maximum of a quarter of an ounce.