Senate panel passes 25 percent tax on pot - VTDigger

Senate panel passes 25 percent tax on pot

Tim Ashe

Sen. Tim Ashe, D/P-Chittenden County, chair of Senate Finance. Photo by Erin Mansfield/VTDigger

A Senate panel on Friday approved tax provisions for a marijuana legalization bill.

The Senate Finance Committee placed a 25 percent excise tax on the sale of marijuana. The tax, which would function like a sales tax, would be applied to retail sales of the drug. Tax receipts would go into a special marijuana fund; sales taxes are typically funneled into the education and general funds.

The legislation legalizes marijuana effective January 2, 2018. In the first six months of the fiscal year, a 25 percent tax would generate between $5.6 million and $8.7 million, according to estimates from the Joint Fiscal Office.

The tax would raise between $13.4 million and $20.8 million in 2019, the first full year the law would be in effect, according to Sara Teachout, a financial analyst for JFO.

The Shumlin administration estimates the cost to regulate the legalized sale of pot would be $2.2 million.

The estimates are lower than projections from a Rand study, which pegged tax revenues between $20 million and $75 million. That’s because Rand estimated the state would benefit from pot tourism; JFO used more conservative state estimates for the number of people from out of state who would purchase marijuana in Vermont.

Senate Finance also set up a licensing fee structure for retail sales outlets for the drug of $15,000 to $25,000. More than a dozen other administrative fees range from $100 to $1,000.

The legislation does not allow the sale of homegrown pot, nor does it allow edibles.

Nonprofit medical dispensaries that now are the only legal outlets for the purchase marijuana would be allowed to become for profit entities and would be the only source of certain pot products, including tinctures and edibles.

The committee voted 6-1 to approve S.241. The bill will now head to the Senate Appropriations Committee, which has jurisdiction over how revenue from marijuana taxes and fees will be distributed across state government.

Sen. Kevin Mullin, R-Rutland, was the only no vote in the committee. He expressed several concerns, including whether the proposed law would set up a closed market to benefit a few wealthy people.

Kevin Mullin

Sen. Kevin Mullin, R-Rutland. Photo by Erin Mansfield/VTDigger

The Department of Public Safety, which also houses the Vermont State Police, would begin issuing a limited number of licenses to up to 30 applicants in the spring and summer of 2017. Licensees could start selling Jan. 2, 2018, and the department could decide to approve more dispensaries through 2019.

No credit card sales, different prices for out-of-state purchasers

Charles “Chuck” Karparis, the senior vice president of lending at the Vermont State Employees Credit Union, testified Thursday. He signaled that VSECU may be the only banking institution in the state that would allow marijuana dispensaries to open checking and savings accounts.

“We do currently offer those accounts to Vermont’s medical marijuana dispensaries,” Kaparis said. “We’re really looking to see what the final law is to determine to what extent we can provide those services.”

Sen. Tim Ashe, D/P-Chittenden, asked how the state could avoid having dispensary owners showing up at the tax department with huge canvas bags full of cash. Kaparis replied: “We’re trying to make it so that if (marijuana) does become legal in the state of Vermont that we can provide financial services so that things like that don’t happen.”

Customers would still not be able to pay for marijuana with a credit card. However, members of VSECU would be able to write checks to the dispensary just like any other business. Dispensary owners could also pay any applicable taxes by check.

The committee decided 5-2 in a straw vote that it was best to legalize marijuana in steps rather than all at once. Ashe, who agreed with the rest of the committee, described the measure in football terms as a “first down strategy” for legalization as opposed to gunning for a “100-yard return.”

The committee passed an amendment 4-3 that prohibits dispensaries from selling non-marijuana products in a bundle with marijuana. Sen. Michael Sirotkin, D-Chittenden, presented the amendment, saying he did not want dispensaries to sell $50 t-shirts that come with a handful of free joints.

The committee rejected an amendment that would have allowed dispensaries to sell the same amount of marijuana to Vermonters and out-of-staters. The limit will be a half-ounce for Vermont residents and a quarter-ounce for out-of-staters.

By comparison, Colorado has a one-ounce limit for residents and a quarter-ounce limit for nonresidents. Washington has no residency limits on how much a person can buy.

Sen. Richard Westman, R-Lamoille, said it’s important to keep the limit as low as possible when marijuana is first legalized. “If you put an ounce (into the bill), you’re never going to put the genie back in the bottle to go lower,” he said.

Mullin said there was nothing to stop tourists from asking a Vermonter to walk in and buy the larger amount of marijuana for them.

The cost of pot legalization

The administration projects that the total cost of legalizing pot in the next fiscal year would be $2.21 million across the departments of Public Safety, Health, Tax and Agriculture, according to Finance and Management Commissioner Andy Pallito.

The largest share, $920,000, would go to the Tax Department to fund two positions and to build an IT system to implement the excise tax model. $500,000 is slated for the Health Department to fund education and prevention efforts, and $230,000 would go to the Department of Agriculture. Public Safety would get $470,000 to cover drug recognition training for police officers, the rule-making process, and lab equipment.

Financing for the implementation raised eyebrows in the Senate Appropriations committee. Pallito said the state would fund the initial $2.21 million investment with the anticipation of money coming in at the end of FY17 and in FY18.

The administration doesn’t have a clear picture of the total expenses in the following years, but based on preliminary reports from a wide range of agencies, Pallito said he expects the annual tab will be between $10 million and $12 million.

Sen. John Campbell said that the Senate is giving the bill a “fair shake.” The bill is still on track to work its way through the Senate before lawmakers break for Town Meeting Day, he said.

The Senate Transportation, Economic Development and Agriculture Committees are still planning to weigh in on the legislation, Campbell said.

The bill also still needs to clear Appropriations, which, Campbell said, “will be its biggest challenge.”

Editor’s note: This story was updated 9:22 a.m. Feb. 14 with additional information about the cost of regulating marijuana.

Anne Galloway

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  • Wendy Wilton

    Why would a marijuana user buy the legal stuff with the high taxes if they can buy it more cheaply in the illegal market? Colorado’s experience is that the illegal market did not disappear with legalization.

  • Mary Daly

    So a 25% excise tax! What sane marijuana user will stop growing their little stash in the woods somewhere so they can pay a 25% tax on someone else’s? The 25 new police officers? We’ll have to buy them 25 ATV’s to do their surveillance. Even then, who thinks they can find it all? This whole thing is such a BAD idea and such a waste of time.

  • Keith Stern

    I hope they have a plan ready for the increase in homelessness that Colorado has now.

    • fred moss


      There is one thing Montpelier shines at; moving forward full steam with NO plan. Rest assured, that is the case here.

    • Brian Scott

      Don’t know why you are getting so many down votes for this. Homelessness is increasing in Vermont and it’s likely that we’ll see some migration of the homeless from Boston and NYC with legalization. It’ll be a good time to own a hotel/motel since they’ll be packed full every night the temperatures drop courtesy of the state…

  • Neil Johnson

    OH Joy! We are going to be the biggest drug dealers on the east coast! Yeah! Thank you Senator Kevin Mullin for being the only one to Vote No!

    Our state will soon have complete monopolies on Alcohol, Cigarettes, Marijuana, Gambling, Education, Healthcare (Doctors/Insurance and Drugs)…..

    If they have their way all fuels by a carbon tax! They are working on complete control of our property via zoning restrictions, in my town there is no commercial use by right, have to ask special permission from those in power……notice all the monopolies are very expensive.

    That’s the power and sole purpose of monopolies, to increase profits.

  • Tom Sullivan

    Being an opponent of legalization, I think a 25% tax is great!

    You just knew that the progressives were unable to resist the urge to slap a hefty tax on marijuana and begin planning how to spend all of that projected revenue. It might already be spent.

    But, all its going to take is a new president this November who doesn’t agree with legalization, in which case he (or she) will pull the plug on legalization and enforce federal law, and all of this effort will be wasted time paid for by VT taxpayers. Well done.

  • Gilbert W. Chapman

    This whole ‘affair’ is another example of how Liberals abuse the poor in order to increase tax revenue for Montpelier to waste ~

    Example One ~ The Lottery is the most regressive tax known to Mankind . . . The poor not only buy more lottery taxes than the rich and the semi-rich, but the cost for each ticket takes a larger percentage of their incomes . . .

    Example Two ~ Taxes on beer/liquor . . . If an Elite guy buys a six pack every day, it’s a much lower percentage of his income than the what the poor guy pays . . . And the rich guy buys his liquor in New Hampshire on his way home from a Cape Cod vacation, and pays no state taxes . . .

    Example Three ~ Cigarettes taxes . . . See Example Two

    Example Four ~ Gasoline taxes . . . If two men live in Waterbury, and commute to IBM every day, the poor man (who probably is driving an older, lower gas mileage car) spends a higher percentage of his income on the gasoline tax.

    So now . . . The Liberals in Montpelier legalize marijuana . . . Encouraging the poor to waste money on ‘unhealthy drugs’ . . .

    I could give other examples . . . But I suspect most readers have gotten my point by now.

    Democrat politicians used to be the friends of the working man . . . Not so anymore.

  • Roberta Barone

    Why would people buy legal marijuana with a 25% tax, when they can buy it illegally for less? This legislation just encourages black market sales.

  • timothy price

    What other commodities are sold in Vermont that endure a 25% tax? Other than deparating and greed, why is this tax being put into law? There are good laws that we should obey, and there are bad laws that must not be. (paraphrase Martin L. King.)

    • Timothy: the tax on “spiritous liquor” is 25%. That is one reason senators decided on that particular rate.

      • Usury is tagged at 20%. May be the reason so many Eastern Vermonters go to NH to buy alcohol.

        • Gilbert W. Chapman

          Great ‘Comment’ Mr.Veitch . . . When I lived in White River Junction, I would simply cross the river and purchase liquor there . . . Then . . . after moving to Chittenden County . . . I’d buy a bottle or two on the way TO and back from Cape Cod . . . Massachusetts is even worse with taxes on liquor.

  • Santina Huskey

    The way this Bill is written there is no benefit to the average Vermonter. Marijuana is already decriminalized in Vermont and Medical Marijuana is already legal.

    In their Bill Homegrown is illegal so there will be an increased crack down and fee’s for those who have been growing their own. Those residents currently paying nothing will be paying state prices plus 25% tax .

    Distribution will be limited to 30 high level grow operations (any organic farmers in the state house applying?) eliminating small level growers. The initial pitch was for mid level growers who would be able to have up to 99 plants. That would have lifted many Vermont residents out of poverty. Now it will make 30 corporate sellers filthy rich .

    There will be an influx of Marijuana tourism and an increase in VT residents including the indigent moving in for weed. With this comes increased crime and increased utilization of Medicaid and other state services as not all of these new residents will have jobs above minimum wage or be seeking jobs at all.

    There will be a slew of additional costs to the state associated with legalization including increasing law enforcement and rehab centers. Colorado has been sued 4 times over their legalization and currently they are in court fighting another lawsuit from their neighboring states.

    In the end what are the benefits of this current bill as it stands? None except to 30 high level corporate growers chomping at the bit to become millionaires.

    Funny how in the other states that legalized it was done on popular vote but in Vermont the State will choose it’s residents path. I believe they know that residents would defeat their bill as it’s written and demand that home grown and small level growers be included to raise many in Vermont out of poverty not their chosen corporate few.

    I hope it’s defeated as it stands. Not until all residents in Vermont who are interested are given the right to apply to benefit from a legal marijuana market should this pass. It’s time those pushing their agenda’s think beyond themselves and do what’s best for ALL the residents of Vermont not just a chosen 30.

    • Bob Orleck

      Totally agree with you except your last two paragraphs. Just leave it the way it is. We do not need to legalize it and for sure we don’t need to have stores selling it. You are point on with the rest of your comments.

  • Judith McLaughlin

    …”In the first six months of the fiscal year, a 25 percent tax would generate between $5.6 million and $8.7 million, according to estimates from the Joint Fiscal Office……JFO used more conservative state estimates for the number of people from out of state who would purchase marijuana in Vermont.”

    Montpelier has never……and I mean never…successfully forecast a correct estimate for a new tax. It’s been estimated that 80,000 Vermonters are pot smokers. We really don’t know who is willing to drive here just to pick up a small amount. So, the real question is, how many of the current pot smokers, (both in state and out of state), are going to immediately drop their illegal (and cheaper) source?

    Not many. It will take YEARS to wean out the illegal trade.

    In the meantime, like regular clockwork, we will create a budget (more police, more human services programs) which is based upon poor wishful thinking as well as poor forecasting….to once again fall short in the budget….and have to make up for it in new taxes elsewhere.

    We need to be very vigilant on this one.

  • Justin Turco

    All that tax revenue! Wow. Sure hope that’s not why we are doing this! Because you know who we are going to collect that tax revenue from? I’ll tell you who. We are going to collect it, to a very large degree, from the very people who already rely on one type of government assistance or another. Legalizing dope will only further degrade the quality of life for the people who are already most at risk. Want to increase the divide between the haves and have nots? This is how you do it. Also, there is no way you will convince me that, for too many people, pot isn’t a stepping stone to other ways to get high. How do I tell my kids not to smoke dope now. Thanks for nothing.

  • Chuck Shannon

    The final nail in the coffin in Vermont.

  • Mark Milazzo

    I just wish the Legislators could put as much energy into reducing Vermont’s property tax that they put into this issue.

    • Ed Gomeau

      I have not heard one logical reason why Vermont needed this legislation. It’s incredulous that the Legislature could devote multiple committees, regional hearings, staff time, paid consultant reports and who knows what else to this boondoggle. I have lived in Vermont four years but have never seen a Legislature so out of touch with reality as Vermont. Let’s not address real issues, excessive state and local taxes, a broken, outdated, antiquated education funding system, economic development (lack of) young people abandoning the state for saner locations. No, let’s spend our time on meaningless, self indulgent legislation that has significant ancillary costs attached to it that are completely ignored.

  • Brian Kelly

    The most important reason to legalize marijuana is to stop criminalizing citizens over it.

    Would you rather legally be able to posses marijuana and have the option of buying it with the overly expensive %25 tax with the option to continue to get it the same way you have always done while it was illegal until they lower the taxes…

    Or would you prefer to keep criminalizing marijuana consumers?

    During the marijuana legalization process, the black market is a form of checks and balances and is a good thing because people continuing to purchase off the black market it protest of high taxes will eventually force lawmakers to lower them.

    Let’s first at least get legalization.

    The more states that legalize will eventually force the feds to legalize nationwide…

    • Jim Brochhhausen

      The criminalizing of citizens is a false arguement. It is decriminalized in VT. Can you tell me anyone, in the last two years, who has had criminal charges brought against them for possesing small recreational amounts of pot?

      The tax issue – Can you also name any significant tax in VT, that has been lowered in the last 6 years?

    • edward letourneau

      “….keep criminalizing marijuana.” Anyone who thinks using pot is criminal in vermont is smoking too much of it!

  • John Grady

    “The tax would raise between $13.4 million and $20.8 million in 2019, the first full year the law would be in effect, according to Sara Teachout, a financial analyst for JFO.”

    I’m not up on the details and sit here wondering why wouldn’t the state grow the weed and make tons of money by distributing it threw the existing Vermont State Liquor Stores ?
    Set up a state run grow operation.

    2 years to do something that should take 2 months is another example of the ability of the people running things in this state who think nothing of giving away most of the potential revenue.

    There is probably a few people sitting in Springfield Prison with the ability to set up a large grow operation in one of the old factories in Springfield. Parole 1 of them under work release and tell him to get back to work growing weed but for the state for a salary.

    Greenhouse Tomato’s $2 a pound

    Weed $5,000 a pound ?
    The state could have what a 95% profit margin by renting a building an hiring some people to grow the weed.

    Am I missing some reason it isn’t easy money for the state to grow the stuff ?

    • Setting aside the question of whether or not this is a good idea, most legal scholars agree that state cultivation of cannabis would be pre-empted by federal law. However, as long as the state is merely issuing licenses, there is no direct conflict.

      • Supporting statewide regulated home grown with this bill would boost local economies and help average Vermonters pay their property taxes, buy their firewood, make their own medicinals, and encourage Vermonters to all be part of this multi million dollar windfall-instead S.241 gives the anointed few the licenses to grow in a virtual monopoly-and with the tax revenue going to boost the law enforcement to bust the local Vermont home growers thereby protecting the gifted license holders. As currently written, and just passed by the Finance Committee, S.241 will be a disaster for the 99% of Vermonters.

        • Tom Sullivan

          “Supporting statewide regulated home grown with this bill would boost local economies and help average Vermonters pay their property taxes, buy their firewood”

          How? To grow your own and sell it while avoiding paying any taxes? Nice.

  • Looks like most of the written comments on the 25% tax and the marijuana issue are solidly negative.

    On the other hand, it seems that the pro-marijuana folks are unable to present any written responses to rationally defend the marijuana policy and thus are reduced to anonymously hitting the thumbs down button on the comments presented.

    Its probably safe to say that when the marijuana policy blows up in future, these same anonymous thumbs down pushers will want to remain anonymous.

    • Paul Lorenzini

      Blow’s up in the form of promised pensions, is that what you meant Pete?

    • Bob Orleck

      Excellent observation Peter. I have had many exchanges with the pro-marijuana folks and they cannot intelligently discuss the dangers associated with this legislation. You said a lot here with a few words. Thanks again.

  • pat mcdonald

    Here is what the bill says will happen to the revenue collected by S.241:

    Revenue generated by this act shall be allotted in the following formula:
    (A) 25 percent to prevention of substance abuse;
    (B) 25 percent to treatment of substance abuse;
    (C) 25 percent to criminal justice efforts to combat the illegal drug trade and impaired driving; and
    (D) 25 percent to the General Fund for the implementation, administration, and enforcement of this act with any remaining funds allocated equally among subdivisions (A)–(C) of this subdivision (6).

    To date I haven’t heard specifics about what this money will be used for to prevent, treat or enforce, etc. Doesn’t look like any revenue is going to offset ever increasing taxes.

    • Bob Orleck

      Pat, the formula is a smokescreen to deflect criticism of the legislation and to fool people. If people would only think about it for a minute they could see the insanity of it all in setting up stores to sell marijuana to collect 25% on the sales so they can prevent people from using it. Now really, does that make any sense? The same silliness exists for the rest of the spending smokescreen. Sell it to them to use and with the tax money help treat them! Boy that is logical. For sure it will increase the number of people using from the stores and the already existing illegal market and we will get more drugged driving so we will use the money we get from taxes on selling what is increasing the drugged driving to increase law enforcement to prevent drugged driving. How can this make any sense to a thinking person? Not only that, the 25% tax and high overhead of the stores will insure that current users stay with the illegal providers. So again the silliness of saying this law will help eliminate the black market. It won’t! The black market will welcome the entry of the stores into the Vermont market. What the legislators won’t acknowledge is that they are really counting on the drug tourists who will be the ones to drop the dollars that will generate the tax revenue. The tax will only work when these folks come from Boston, New York and Montreal and they know it. And you can be sure when the details of how the money will be spent is worked out, it will be a far cry from the promotional formula they are touting now. One thing you can be certain is the money will be used to grow the bureaucracy and increase the power our out-of-touch Vermont legislators who have no idea what is good for the people of Vermont.

  • Jon Corrigan

    Vermont’s ‘Department of Public Safety’ should be re-named. It’s a political office with absolutely no regard for the public, and even less for safety.

  • Bob Orleck

    To the editor: I submitted this comment the Saturday morning the article appeared. I cannot understand why this was not published. It is all fair comment and does not violate your policy the way I read it. Here it is again just in case you did not get it. [email protected]

    The quotes below are from the article.

    “The Senate Finance Committee placed a 25 percent excise tax on the sale of marijuana. The tax, which would function like a sales tax, would be applied to retail sales of the drug.” This tax is what it is all about and not about the facts that show a clear danger to our children and to us. The addiction to money is more important than the addiction to drugs in the minds of our “leaders”. This is another one of those bad things for Vermont that Governor Shumlin and the other progressive-liberals are bringing down on us.

    “The legislation legalizes marijuana effective January 2, 2018. In the first six months of the fiscal year, a 25 percent tax would generate between $5.6 million and $8.7 million, according to estimates from the Joint Fiscal Office.” This is deceptive because while this sounds like a lot of money if they were to give us an analysis that included “drug tourists” from Montreal, Boston, New York, etc., the amount of money would be obscene and our state will be known as a “drug mecca”. Just imagine all the drugged drivers and skiers. Do this and they will come!

    “The legislation does not allow the sale of homegrown pot, nor does it allow edibles.” That is because the state does not want any competition. The result of 25% tax plus high overhead of stores will mean an expensive product that cannot compete with the illegal drug dealers. So we will have both legal drug dealers and illegal drug dealers. Senator Mullin is correct in his concern.

    The legislation (as currently written) does not include edibles the article says. But the next paragraph says that “only legal outlets….would be the only source for certain pot products, including tinctures and edibles.” To my face, sponsor, Senator Joe Benning, said there would be no edibles. Was he not telling me the truth or has he also been deceived? If we are not going to sell edibles why is the Commission that is established in the legislation studying and making recommendations about edibles?

    And finally, shame on VSECU for partnering with drug dealers and making this legislation work. VSECU couches it as a solution for the “cash” problem but the way they have come out now for this is to enable it to happen. Again, shame on you VSECU!

  • Rick Veitch

    The current bill racing through the senate, S.241, creates a state regulated monopoly that brands anyone growing marijuana who not rich enough to get one of the few licenses, a criminal.

    Since right now a large percentage of the $225 million dollar illicit market comes directly from those grown cultivators, S.241 will legislate an unprecedented transfer of wealth out of our local communities and into the hands of a few.

    The bill carves out $1.5 million from the general fund, 25% of all revenue and 50% of all seizures for the state police, at least some of which will go to stop home growers.

  • Gilbert W. Chapman

    Interesting . . . Yesterday afternoon there were numerous thumbs ‘ UP ‘ for the Comments reflecting ‘ Conservative ‘ views . . . Where Oh Where did all of those liberal, grass smoking hippies come from ? ? ?

    • michael olcott

      they came from the houses of your neighbors,coworkers,the homes of the people who provide you with goods and services everyday.In short they are the everyday people of VT and you and your prohibitionist friends are in for a huge shock when they are allowed to step into the light after this is passed..

  • Chuck Shannon

    Vermont is trying to tax the air we breathe. Our leaders aren’t good at sticking to budgets or living within their needs. Whatever money generated from these taxes with be shared with crooked “Non Profits”. Due to the addiction problem I am against legal pot. We have to fix that before we do this. Our kids are hurting enough now.

  • Gary Murdock

    This bill should include the following provision: Any state employee and elected official must wait a minimum of 5 years after leaving state government before having any involvement in this industry. Are you reading this Senator Zuckerman?

  • Paul Richards

    In terms of increased revenue and the overall wellbeing of our society this will eventually be a huge net loss if this gets approved. Pot is already decriminalized. Nothing good will come of legalizing pot.

  • Mike Ferzoco

    I have yet to hear 1 coherent argument why pot should not be legalized. Those against freedom say wait, wait wait, and- don’t we have better things to discuss? Those that want it legalized cry about taxation. Did you think the state is going to hand it out? This is an issue that needs to be dealt with now. Ending this facet of the war on drugs will allow the state to tackle the opiate crisis. I f the tax is so horrible, address it AFTER giving it a try.
    There’s gotta be a middle ground somewhere

    • Bob Orleck

      “I have yet to hear 1 coherent argument why pot should not be legalized.” Mike Ferzoco, it must be that you are not listening. If you would have attended the press conference of physicians from six different medical organizations you would have heard very coherent arguments regarding the dangers. If you would talk to police chiefs and sheriffs they would give you something to think about. If you would take time and read the 83 page Health Assessment report of the Vermont Department of Health _ marijuana_regulation_in_vermont_201601.pdf and the agreement with it by the Vermont Principal’s Association, you would read many coherent arguments why it should not be legalized. You might even find coherent the argument I presented to the legislators on this.

      • Mike Ferzoco

        Ah, the reefer madness set. Got it. It’s a “gateway drug,” right? Can I see stats on pot overdose deaths? Oh, and -2 tokes and where’s the heroin? Can we be grown ups for a moment? I think the issue these docs allude to is compulsive behavior, not the substance itself. The “dangers” of pot is being arrested! The issue confronting us is freedom. I’m for it.

        • Bob Orleck

          Mike you and I know that you did not read the things written or you would try to intelligently discuss them and not just parrot the pot lover’s put down lines. You are so wrong and you don’t get arrested for something that has already been decriminalized. Why is that hard to understand? Marijuana worsens psychotic/schizophrenic behavior, damages brain development in the young and that is proven by science and the death by drugged driving increases in places where pot is legal is documented. Read the facts with an open mind if possible.

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