Garrett Durham mops the floor of the flowering grow room in the Atlantic Cannabis Collective operation in Auburn. Durham says that he cleans the space daily to prevent disease and pests. Andree Kehn/Sun Journal

Medical marijuana has been legal in Maine for two decades, but now that state regulators have finally given the industry its own tax category, its true size and value is known for the first time – and it’s twice as big as anyone, even the industry itself, had dared to believe.

In 2019, Mainers bought more than $111.6 million of legal medical cannabis. While not as big as Maine’s $485 million lobster market, or its $167 million potato crop, medical cannabis is bigger than blueberries, maple syrup, apples, elvers, herring and oysters – combined.

While Maine’s eight state-licensed dispensaries did well last year, ending a two-year decline by posting a $26.3 million year, new state sales tax data reveal that most of Maine’s medical marijuana market belongs to its network of 2,600 medical marijuana caregivers.

Maine caregivers sold at least $85.3 million of marijuana in 2019, or 76.5 percent of all Maine’s medical marijuana sales. As large as it is, even that tally doesn’t represent the full economic impact of caregivers, as it’s one month short. Maine only began tracking caregiver tax revenue in February 2019.

Activist Dawson Julia of Unity, the first caregiver to open a medical marijuana shop in Maine, hopes the new caregiver tax data will finally give the mom-and-pop side of Maine’s marijuana industry the political juice and respect it deserves. For him, the dominant market share means leverage.

“This is huge for us,” Julia said. “You want the tax revenue that comes from a $111 million market? Then you can’t regulate the caregiver out of existence. Sure, fix problems when they occur, but don’t fix a thing that’s not broken, ’cause what you’re doing is killing us, sending us right back to the black market.”

The Office of Marijuana Policy’s plan to saddle medical marijuana providers with the bill for a track-and-trace system is an immediate threat to caregiver tax revenue, Julia said. State tax data put the caregiver tax haul on their $85.3 million in 11 months of sales at about $4.8 million a year.

When lawmakers decided to require medical cannabis providers to adopt the same seed-to-sale system as the adult-use market, they told caregivers that Maine would be picking up the tab. But two years later, the state has shifted that regulatory cost to caregivers and dispensaries.

They will have to pay a $40 monthly licensing fee to use the cloud-based inventory system, which uses radio-frequency identification tags to track the movement of commercial marijuana plants from seedlings to sale. To comply, businesses must also buy plant tags and packaging labels, at 45 cents and 25 cents each.

That additional cost, and time spent tagging plants and entering data into the online system, threatens to send as many as half the state’s caregivers packing, Julia said. Some will quit the industry, but others will simply start selling on the black market. Either way, the state loses tax revenues.

“It’s the leverage we need to save our mom-and-pops,” Julia said. “It’s pretty simple: Kill us, lose taxes.”

If left alone, Julia thinks caregiver-generated tax revenue will grow even bigger this year, even after adult-use sales begin this spring. With only 30 towns embracing the adult-use market, most Mainers will find it easier to buy their marijuana at one of Maine’s 250 caregiver-run medical shops, Julia said.

Consumers no longer have to provide proof of a qualifying medical condition to obtain a medical marijuana card, and the cost of obtaining certification as a patient has declined sharply.

Caregiver sales grew steadily throughout the year, from a low of $1.7 million in February, the only month that dispensaries outsold the caregiver network, to a string of $5 million-plus months in August, October and November. In December, sales reached a peak of $16.5 million, which included sales for that month by larger-volume businesses, as well as sales for the quarter that ended in December by smaller businesses, which only have to report every three months.

Caregivers benefited from a slew of new state laws that allowed them to open their own shops, hire more than one employee, treat an unlimited number of patients and sell to out-of-state certified patients, and allowed doctors and nurses to certify patients for marijuana use for any medical reason.

For example, the number of caregiver employees jumped from 360 in 2018 to 1,883 in 2019, allowing the average caregiver to serve more customers without having to ignore their gardens. For example, Stoner & Co. in Biddeford has grown from a two-man operation to a team of 20 over the course of a single year.

The elimination of the qualifying condition requirement to get a medical card led to a 42 percent jump in the number of medical marijuana cards printed in Maine, from 45,940 in 2018 to 65,368 in 2019. Falling certification costs didn’t hurt, either – what used to cost $300 can now run as little as $30.

Medical dispensaries reaped the benefits of Maine’s decision to allow medical marijuana sales to out-of-state patients and the elimination of the qualifying condition requirement to obtain a medical marijuana card. Their year-over-year sales increased 11.2 percent, from $23.6 million to $26.3 million.

Dispensary sales came close to matching their best year, 2016, when they sold $26.6 million of cannabis.

“We smashed our sales records last year,” said Scott Reed, the president of state operations for Curaleaf, which manages dispensaries in Auburn and Ellsworth. “Our patient count is up. Old customers are back, and new ones are walking in every day. And the average customer is spending more, too.”

A decision to expand product variety, especially in the edible category, helped spur growth, Reed said. A customer loyalty program helped turn curious walk-ins into repeat customers, especially offering sales discounts that essentially offset the cost of obtaining a medical marijuana patient card.

“I’ve got to say, 2019 was a great year for us,” Reed said. “We’re talking double-digit growth.”

Not all dispensaries saw growth, however. Sales at Wellness Connection, the largest cannabis company in Maine with four licensed dispensaries, remained flat from 2018 to 2019. After two years of declining sales, CEO Patricia Rosi called that good news.

Foot traffic is up, including many new patients who wouldn’t have qualified for a medical card under the old system, but the average ticket sale is down, with customers coming in more often but buying smaller amounts at each visit, Rosi said. Customers are obviously comparison-shopping, she said.

Although sales are flat now, Rosi sees evidence that Wellness will thrive in the looming adult-use market.

“Most clients are walk-ins,” Rosi said. “They come in to inquire about or buy CBD, but almost everyone lingers, asking our team questions about the legality of the market and the new cannabis products being offered. … Overall, most are just in awe (of) how far cannabis has come. It’s inspiring to watch.”

Canuvo, the only family-owned dispensary in Maine, wouldn’t discuss its 2019 sales. Sage Peterson, the Biddeford company’s CEO, described it as a challenging year. A new seed-to-sale model proved difficult, Peterson said, but the development of a new wholesale market was a bright spot.

Peterson is eager for adult-use sales to finally begin so the marijuana market will “straighten out.”

“The medical marijuana program has expanded beyond the available market share,” Peterson said. “It is overcrowded as many are biding their time to move into adult use. It is necessary for adult use to begin so that the vendors willing to cater to either adults or medical patients will have enough market share.”

For years, Maine did not track caregiver sales tax payments, making it impossible to quantify the overall size of the market. Tax payments submitted by this network were spread across a broad range of different tax categories, from farmers to pharmacies to foresters.

Without caregiver tax data, Catherine Lewis, the head of Medical Marijuana Caregivers of Maine, wasn’t able to put an exact dollar value on the mom-and-pop market, but based on what her members told her, she estimated caregiver sales were about to overcome the dispensary side of the market back in 2018.

National cannabis market analysts are also surprised by this new take on Maine’s medical market. BDS Analytics of Colorado used real-time sales data in other states and estimated state patient counts to peg Maine’s 2019 medical marijuana market at $50 million – missing the mark by a factor of two.

BDS analyst Michael Arrington said it is difficult to predict an untracked marijuana community such as Maine’s caregiver network. While growth on this side of the medical market is likely, Arrington doesn’t think an $111 million market can be explained by a jump in caregiver sales alone.

“My suspicion is that there was a lot of untracked activity before this,” Arrington said. “How careful was Maine keeping track of whether caregivers were paying taxes? I suspect not that well. Cannabis usage in Maine did not double in a year, but I would bet marijuana tax compliance is at a record high.”

Maine’s adult-use business licensing system requires applicants to be paid up on their taxes. Applicants citing their experience as a medical marijuana caregiver on a recreational license application must prove they have paid all taxes, including a 5.5 percent sales tax and an 8 percent snack tax on edibles.

This revised picture of Maine’s cannabis market suggests the state is following a traditional medical-to-recreational path. Without caregiver data included, Maine medical sales were slumping. In most states, medical sales grow until recreational sales begin, then fall to 15 percent of a combined cannabis market.

The Maine Office of Marijuana Policy hopes to issue its first adult-use cannabis business licenses this spring.