An idiosyncrasy in the Colorado constitution will result in a one-day suspension of state sales tax on recreational marijuana. No sales tax will be added to cannabis purchases made on September 16, the final day of the end-of-year state fiscal report.
The provision exists as a piece of a larger bill signed into law on June 4 by Gov. John Hickenlooper. The new law permanently reduces the sales tax included in each recreational marijuana purchase. .
The recreational marijuana sales tax rate will lower from the current 10 percent to 8 percent beginning in July 2017. Hickenlooper says this change is being made in hopes of hurting the sales still happening illegally:
“We still have a black market, and we want to moderate our taxes to make sure that the risk of someone selling illegally. … We want to eliminate that. And one way is to make sure there is not as large a price differential.”
(Colorado Governor, John Hickenlooper)
The one-day repeal reflects the aims and philosophy of Colorado’s Taxpayer’s Bill of Rights. TABOR is a conservative-backed measure designed to ensure that voters approve all new taxes based on projections of collections and state spending.
Officials say the one-day elimination of sales tax will serve to meet constitutional requirements and allow for the current rate to be reinstated immediately thereafter. Although marijuana sales tax revenue has actually fallen below estimates, an uptick in the economy has increased state spending, causing the TABOR provision to kick in.
Sen. Pat Steadman, D-Denver, who wrote House Bill 1367, promised:
“This is only a first-year problem. We’ll never have this problem again.”
Colorado anticipates losing approximately $100,000 in revenue from the rollback. That number is dwarfed by the estimated loss of state income from a single-day suspension of the 15 percent excise tax on cannabis sales from growers to retailers, projected to be $3.6 million.
It is all part of the process by which Colorado is learning to chart its fiscal future now that the legalization of recreational marijuana is a reality.
The upcoming ballot measure, which is not expected to draw public interest in the way legalization did, will ask the voters to make a choice regarding the projected $58 million in marijuana revenue. If voters decide to allow the state to keep the money, around $40 million will be applied toward school construction. The rest would funnel to youth mentoring programs, agriculture, and drug treatment. If the voters veto the measure, approximately $33 million of the revenue would go to cultivators and the buying public as a part of tax breaks on sales and production. A sales tax refund of the remaining $25 million would then be distributed to all taxpayers.
Unlike the initial ballot measures that legalized marijuana in Colorado, this November’s referendum isn’t expected to generate much attention. The governor said he would spread the word as he travels the state for town hall forums this fall and will rely on state lawmakers to help push the message.
photo credit: Washtimes