With the voter-imposed deadline to create recreational marijuana regulations just a few months out, Breckenridge officials took the first steps toward asking voters to approve a 5 percent excise tax on the drug Tuesday night.
The council voted unanimously to approve an ordinance on first reading that would place the excise tax question on the ballot in November.
If approved, the 5 percent local excise tax would be added on top of local sales tax and a 25 percent state tax on all marijuana sales.
Officials say the tax revenue is needed to cover the cost of implementing regulations and enforcing new laws on the consumption and sale of the now-legal drug.
But the legal sale of recreational marijuana is uncharted territory for local municipalities. It is not yet clear how much money in tax revenue retail sales will generate or how much local towns will have to spend creating and enforcing new laws.
Council members said they might to go back to voters in the future to adjust the amount of the tax to match the town’s actual expenses relating to marijuana.
“I think it’s a reasonable idea to go to the ballot two times in pretty rapid succession because we’re adjusting and learning as we go,” Councilwoman Wendy Wolfe said. “That would be understood by voters.”
For now, the town opted for a 5 percent excise tax because it is the same as the fee charged on medical marijuana sales, and it falls in line with the tax questions other cities in Colorado, including Denver, are considering.
“That seems to be the number,” Councilman Mark Burke said. “It just keeps us consistent.”
The tax proposal thus far has the support of some local marijuana business owners as well, who were concerned the taxes imposed on recreational sales might be so high it would price them out of the market.
“It’s enough to give them some revenue without being so high that it makes you uncompetitive with the guy growing in his basement and selling out of his living room,” said Charlie Williams, who owns Alpenglow Botanicals, a medical dispensary and has expressed interest in getting into the recreational retail business. “It’s going to be a cost of doing business. It is what it is.”
Breckenridge officials said they’re less concerned that recreational customers in Summit County will turn to the black market if the taxes make products at legal retail shops too expensive, because so many customers here are visitors.
“Our market’s going to be a little bit different than Denver,” town manager Tim Gagen said at Tuesday’s council meeting. “The visitors don’t know that black market and I don’t think they’re going to go hunt for it.”
There are currently several medical marijuana dispensaries operating in town, which will have the first opportunity to switch over to recreational sales if they choose. Many are expected to take advantage of it.
Council members will need to approve Tuesday’s ordinance on second reading later this month for the excise tax question to make it to the ballot.
Marijuana became legal for recreational use for the first time in Colorado after voters approved Amendment 64 in November. The law allows adults over the age of 21 to possess and consume marijuana and charged state and local lawmakers to create a set of regulations for the sale and distribution of the substance.
The first retail pot shops are expected to be open by early 2014.