Cannabis consumers in Colorado are celebrating and retail stores are stocking up for September 16, 2015. The cannabis industry is not celebrating the Mexican Independence Day, but rather a day that special marijuana state taxes are reduced to zero.
The tax-break day is expected to draw large crowds to recreational stores around the state. On September 16, the 10 percent special sales tax on cannabis products will be waived, leaving only the standard 2.9 percent sales tax on all products — a result of Colorado’s Taxpayer Bill of Rights, or TABOR.
TABOR was the reason that Coloradans, in November 2013, voted on Proposition AA which created the 15 percent excise tax on wholesale transactions and 10 percent special sale tax at the register. TABOR requires all new taxes to be passed by popular vote, including the proposed taxes in Amendment 64. The law prohibits state and local lawmakers from increasing tax rates without approval from voters,. The bill also imposes a TABOR spending limit, or a limit on the total amount of revenue the state can spend in a given fiscal year. Any revenue in excess of the TABOR limit, known as the TABOR surplus, must be refunded to taxpayers in the absence of voter-approved changes. In the case of cannabis taxes, a refund of approximately eight dollars will be issued to Colorado taxpayers, under the “Six-Tier Sales Tax Refund” mechanism, depending on the outcome of a separate ballot initiative this November.
Additionally, the law requires taxes that resulted in excess revenue to be waived, leading lawmakers to “waive” the taxes for one day and reimplement them the following day.
The tax holiday poses a conundrum to store owners who want to take advantage of the waived 15 percent wholesale excise tax, but still have to stock up prior to September 16 to meet the demand of consumers. State officials believe the holiday could result in $4 million in lost revenue, which is unlikely to affect the total annual marijuana taxes collected.
We spoke with Stephen Spinosa, manager of the Denver-based dispensary Good Chemistry, to see how he thinks this tax-break holiday is going to affect sales. “I think Wednesday will be a busy day for the industry, but there will be some confusion.” says Spinosa. “Many folks are labeling it a tax-free day, when it is really a tax reduction day. The special 10 percent marijuana tax will be removed, but all other local and retail sales taxes still apply.”
To help reduce some of the confusion surrounding the holiday, Good Chemistry has put together a “Retail Marijuana Tax Reduction Day” guide which explains the tax-break holiday in full detail for customers. The tax reduction guide can be found at either their Denver or Aurora locations.
If you plan to take advantage of the tax holiday, be prepared for a long wait and be sure you know the tax reduction you will be receiving before you walk through the dispensary door.