Director's office recommends denying petition to require real-time patient verification for medical-cannabis tax exemption

Justin Nordhorn, covering rules work for the director's office, told the Washington State Liquor and Cannabis Board caucus that staff will recommend denying a petition from John Kingsbury to amend WAC 314-55-090 to add a new patient-verification requirement before a licensee may apply the medical-cannabis excise-tax exemption.

"The director's office is recommending denying the petition," Justin said, explaining staff believe existing rule provisions already require verification of qualified medical patients and that licensees must rely on the Department of Health's recognition-card database.

Justin described existing safeguards: WAC provisions require endorsed retail stores to have trained consultants, to maintain records for transactions using the tax exemption, and to train staff to recognize valid recognition cards; the DOH training manual includes instructions for verifying cards in the DOH database. LCB auditors can review records during audits and hold licensees accountable for taxes when documentation is missing.

Staff told the caucus that a rule requiring real-time electronic verification between DOH and LCB would likely require an expensive IT solution and probably exceed the agency's authority over the DOH database. Based on available audit data, staff said misuse of the exemption appears to be limited to isolated bad actors rather than a widespread problem that new rule language would fix.

As an alternative to rulemaking, the director's office proposed targeted education and outreach (for example via GovDelivery and newsletters) stressing the importance of checking recognition cards at each transaction. The board indicated staff responsiveness and agreed to take up the item at tomorrow's board meeting for final action.