Have you ever wondered what determines the price of marijuana at your local dispensary? The final cost depends on several factors, including but not limited to:
- Taxes
- The qualities of the strain
- Labour and shipping costs
Cannabis Excise Tax And PST
The federal government planned the legalization of marijuana as a major source of money for the provinces. The Feds agreed that 75% of the tax revenue made from the cannabis industry would return to the provinces and territories. One tax applied to the industry was the Cannabis Excise Tax. This only applies to the cultivators, producers and packagers of marijuana products; they pay it once private dispensaries, government retailers, and authorized distributors purchase their marijuana products.
While they have to pay the Cannabis Excise Tax, consumers have to pay the provincial sales tax (PST) in their province (much like any other product). In Ontario, the PST is 8%, and it’s combined with the 5% government sales tax (GST) for a harmonized sales tax of 13%.
Higher Quality Means Higher Prices
The final factor impacting the cost of marijuana is the product’s quality. A flower’s “quality” refers to factors like density, trichome levels (these are the resin glands of the plant, containing THC and CBD), colour, smell, and – above all else – potency. These qualities don’t come out of thin air; they are carefully cultivated, and a lot of expertise goes into growing the highest-quality buds. This expertise includes the manufacturer’s expertise and unique growing methods, growing conditions, and type of strain.
This last feature is key. Each strain has unique characteristics, including cannabinoid and terpene levels. These result in different effects that consumers will find more appealing than others. The more in-demand a quality, the more it will cost more than the less popular qualities. This is where a grading system comes in handy. You’ll often see A, AA, AAA, and AAAA beside certain strains; all you need to know is that the more As, the better the strain – and the higher the cost.
Shipping And Labour Costs
Aside from taxes, the logistics of marijuana growth affect how much the product costs at dispensaries. Marijuana grows best in warm, humid climates, and this has an impact on how it’s grown in Canada (which, as you know, is not warm or humid for most of the year). Producers and distributors have to factor in the price of labour and delivery to the product’s final destination. To reduce the risks of unpredictable weather and have better control over the quality of their harvests, many growers are taking their operations indoors. Places with a climate that’s not ideal for growing cannabis have higher production costs since they have to operate indoors.
However, the rise of indoor domestic production can prevent one issue that affects other parts of the globe: seasonal price fluctuation. During harvesting seasons, supply increases from warm, humid areas that grow their marijuana outdoors. A supply increase can lower prices, while a decrease can cause the prices of certain strains to skyrocket.
The Effect Of Legalization On Canada’s Marijuana Prices
The structure of Canada’s industry has meant that our cannabis prices are around 30% lower than those in the United States. There are both simple and complex reasons for this, but the easiest explanation is that the illegal status of marijuana at a federal level in the U.S. prevents the manufacture and sales of the product at an efficient cost. In Canada, there’s also financial security, as national banks have federal protections when dealing in the cannabis market.
The cost of marijuana may vary across the country, but the industry in Canada – with mostly big indoor operations that aren’t beholden to the fluctuations of the growing season – is largely stable. But when it comes to the prices across the Purple Leaf’s selection of flowers, edibles, tinctures and vapes, knowledge is power. The more you understand the factors that influence marijuana prices, the better you can be at buying the right product at the right price!