Oregon's state capitol building, pictured on a sunny winter day.

Jessica Paterson

Strict Testing Requirements Likely to Cost Oregon $10M in Cannabis Tax Revenue, Close Businesses

New product testing requirements that came into effect October 1 are squeezing Oregon’s cannabis growers and business owners harder than regulators may have expected and is likely to lead to a major decline in the state’s cannabis tax revenue.

“October was a defining, if not catastrophic, month for Oregon’s cannabis industry, which, until then, was growing at a very fast rate,” Portland economist Beau Whitney said in a Nov. 30 news release issued jointly by the Oregon Cannabis Business Council and Whitney Economics. “OHA’s new testing rules, which very few existing operations can presently comply with, virtually crippled the supply chain of adult-use and medical cannabis, from grower to retailer.”

On Nov. 30, Whitney Economics released polling data that shows how Oregon’s cannabis market has deteriorated in recent weeks. Of the 683 cannabis companies that Whitney surveyed, 22 percent said they are going out of business under the new requirements and a large majority are planning employee layoffs.

Unfortunately for Oregon’s cannabis entrepreneurs, a lack of licensed testing facilities has led to both increased wait times, as well as price hikes, for testing procedures that are now mandated by the state, and many companies can’t afford to have their products tested. Furthermore, the survey shows that many of the new testing requirements are so strict that a significant portion of previously-approved products are now failing for containing small traces of prohibited chemicals and/or pesticides.

Resultingly, activity on the unregulated cannabis market has seen a dramatic uptick — as high as $187.5 million on an annualized basis — since the new testing requirements took effect on Oct. 1. This shift in consumer activity is likely a result of both growers turning to the illicit market to offload their now-inadmissible products, and consumers returning to their former black market hookups as dispensary shelves become sparser and product variety deteriorates. In either case, Oregon’s cannabis tax revenue is certain to take a hit, with conservative estimates putting the initial loss at a minimum of $10 million, with potential losses reaching as high as $20 million.

The survey was conducted by Whitney Economics from Nov. 14 to Nov. 30.

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