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Traceability Meltdown in WA – Tax Implications

Over the past week, a new phase of the transition between BiotrackTHC and MJFreeway as Washington’s Cannabis Traceability database provider has been unfolding.

As of yesterday, the LCB has made clear that online access to an approved central traceability database will cease at midnight Halloween Eve.  MJ-Freeway and other stakeholders (the LCB and their paid consultants) will now be granted 2 additional months to get their system working.

This is unfortunate, and will impact a number of users negatively (particularly those currently using the free version of Biotrack’s reporting application).  It also has the potential to have many other significant impacts …. Few of which are positive from a policy perspective.

As this situation seems primarily the result of both a lack of effective communication between MJ-Freeway and the LCB (and vice versa) it seems largely to have been avoidable.  While that has the clarity of hindsight, it is also informed by the fact that the LCB has engaged professional external “project managers” to oversee and report on the status of the project throughout it’s brief lifespan.  This sudden result, in the face of how this project has been run, is unacceptable and quite unfortunate.  It seems almost amazing, given the involvement of the state’s Chief Technology Officer (or his/her office).

The few communications from the LCB to those they regulate and those they serve regarding this emerging crisis of traceability have also been ineffective.  I would argue that their lack of transparency has leaned quite close to dishonesty.  Over the past 2-3 working days, many of them have come across as public servants afraid for their job security.  Re-read BS’s comments in the Stranger Article Lester Black put out yesterday and see if you see a tendency to deflect blame and/or accountability away from his organization.

This is, then, a very unusual situation.  It has to be for state employees to be running scared.

Nah … systems fail all the time.  Transitions and complex projects get messed up all the time.  People tell partial truths to cover their asses in such situations all the time.  Their bosses (Guvn’r Jay) don’t hear the bad news all the time.  Negatively impacted parties  get anxious and frustrated all the time.

Perhaps it’s not an  unusual situation at all, then, in that context.

Given the massive disservice that the LCB has just engineered against those it regulates and those it (and they) serve, I had the thought that a lighter-hearted assessment of the situation as it unfolds this week might be useful.  It might help offset some of the angst being felt by licensees and consumers and tax collectors and public health officials and those worried about compliance with that infamous memo written by he named Cole.

To that end, this post will serve as the first of a series of (hopefully) daily short posts that I put up between now and Halloween eve that discuss small pieces of potential impact of the imminent traceability meltdown brought to us by the LCB and their contractors (and all those drunks that keep distracting them from their Cannabis duties).

Each post will mention some facts and possibly some new developments (of which I suspect there will be many).  Each post will also try to introduce some humor and sarcasm into the equation to offset the negativity that seems to be popping up amongst impacted parties.

These brief posts will culminate in a full-on tongue-in-cheek sarcastic monologue regarding the opportunities and risks that this meltdown in traceability presents.

Always remember though, that opportunities and risks differentially impact those that are ready (or otherwise lucky enough) to capitalize fully on what I’m thinking of calling the “Gold Rush of 2017” that commences on Nov 1.

 

OK First Preface Post:  Potential Impact on Tax Revenue

First some speculation:  The traceability meltdown might lead to a decrease in product flow through the seed-to-sale system.  That would negatively impact taxed sales.

Now some facts (estimated by yours truly using statewide daily sales data through this Monday):

During Nov and Dec., if things go as expected, the state would receive $69.5 million dollars in states sales and excise taxes from the retail sale of Cannabis.

During that same period, expected retail sales would generate $3.8 million in local sales taxes, statewide.

While it would be grossly hypberbolic (and somewhat redundant) to say that all of those $73.3 million in expected taxes are at risk of going away, rest assured that some of them are. 

This could cause irreparable harm to the State’s ability to fund the McCleary decision and properly educate those very children otherwise denied the benefits of Cannabis.

Ok … that was a bit hyperbolic.  However, $73 million is not chump change, even for Government.  Particularly when $16,000 (x3) might have fixed this problem with a bit more willingness on the part of the  LCB to recognize that either their or MJ-Freeway’s system appears to have been compromised and that data for which the LCB is responsible have, as a result, been made available in that dark scary place called the internet for a mere $16.00 in Bitcoin.

I’ll likely include some estimates regarding potential tax revenue loss into the “Gold Rush of 2017” story to be posted here, on HI-Blog, at www.highintelligence.org, on the evening of Halloween.  For that matter, I’ll likely incorporate some content related to each of the Preface Posts into the story.

Maybe I should call the story “Tricks and Treats …. Or Traceability?”.

Have a pleasant remainder of your Wednesday and remember these fine words … if you are not tracking it, it is not real ….. if you are not traceabilitying it, it does not exist.

2 Comments

  1. Jason says:

    Where is the accountability at the LCB? Stakeholders are now put at risk because the governing body which claims 37% of each sale didn’t do their job. Let’s face it, when it was announced that MJ Freeway won Pennsylvania and would take over the Washington traceability contract in the same month, everyone knew that MJ Freeway wasn’t going to be ready to get both states up and running on time. That’s on the LCB. Given these facts they should have known there wasn’t a snow ball’s chance in hell that Washington’s traceability was going to be ready on November 1st.

    So……who is responsible for this debacle in the LCB?

    So…..who is responsible at MJ Freeway for accepting a contract and not getting the ball across the goal line on time?

    Where is the culpability?

    • Jim MacRae says:

      Frankly, Jason, I do not believe that accountability exists within the LCB. Perhaps at the lower levels of the staff and middle-management pyramid but not, apparently, at the level of their leadership.

      The only nice thing about this is that (knock on wood), the efforts of the 3rd-party integrators (notably WeedTraQR playing what I view as a leadership role and BiotrackTHC playing what I view as the Calvary coming over the hill at the last moment to help save the day), day-to-day operations and product flow within the industry do not seem to be impacted significantly. It is early and no one has yet had to execute their first weekly synch, but it looks promising.

      That, of course, does not mitigate the absence of a near real-time integrated database representing the industry and available to the regulators and their enforcement arm (and, eventually, to members of the public interested in the information).

      When someone with oversight of the LCB steps up to the plate and says “Enough! You cannot continue to simply deny the existence of problems … I expect you to know actually attempt to address problems.” it is unlikely that the culture of Be-like-an-Ostrich-and-free-your-mind-from-concern will change amongst LCB leadership.

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