Sweet Leaf customers get tax break tied to ballot wording issue
As of Monday of this week, customers who purchase retail marijuana at Sweet Leaf Pioneer in Eagle won’t have to pay an extra $5 per transaction occupation tax.
But the windfall will be relatively short-lived. The tax will be reinstated Jan. 1.
Complications tied to the ballot question that approved Sweet Leaf’s retail operation have resulted in a unique situation where Eagle town government had to instruct the business owners to halt collections of the flat $5 per transaction fee through the end of 2014.
That $5 per transaction occupation fee, along with the retail operation itself, was approved by Eagle voters last November. According to Eagle Town Manager Jon Stavney, the election question that the voters approved followed the specific rules contained in Colorado Taxpayers Bill of Rights. Those rules include a provision that required the town to set a maximum dollar figure for tax collections during the first year.
“Based on revenues from the Sweet Leaf medical marijuana operation, we thought a reasonable thing to do, for a whole year, was to set the figure at $50,0000,” said Stavney. “It’s great news for them that in less than a half of year of operation of retail marijuana, they hit that threshold.”
Sweet Leaf Pioneer launched limited retail marijuana sales in May and shifted to its current seven days a week operation in June. The business is open from 11 a.m. to 7 p.m. Monday through Saturday and from 11 a.m. to 3 p.m. Sunday. As per Colorado’s Amendment 64, state residents age 21 and older can purchase and possess up to one ounce of retail marijuana at a time. Non-residents are limited to one-quarter ounce.
The $50,000 limitation for the $5 per transaction occupation tax is only in effect for the first year of operation. In subsequent years, the town will not have to limit collections to that amount.
While Eagle’s flat $5 per transaction occupation tax will not be assessed at Sweet Leaf through the end of the year, sales tax at the business will continue.
A citizen purchasing marijuana in Eagle pays 23.4 percent sales tax, broken down as follows:
4 percent Eagle sales tax
1.5 percent Eagle County sales tax
2.9 percent state sales tax
15 percent retail marijuana state sales tax
The cost of an ounce of marijuana at Sweet Leaf Pioneer ranges from $215 to $245, which means sales tax charges for an ounce of marijuana ranges from $50 to $57. On top of the sales tax, the Eagle charges the $5 per transaction occupation fee. This flat fee is charged on all transactions, regardless of the dollar amount of the total sale. As of Monday, Sweet Leaf Pioneer had collected $50,000 in occupation taxes.
Why an occupation tax?
“Because Eagle is a statutory town, we can only impose taxes authorized by the Colorado Constitution or Colorado statues,” said Eagle Town Attorney Ed Sands. “As a statutory town, Eagle must have its sales taxes collected by the State of Colorado. The state department of revenue has indicated it will not collect municipal sales taxes that have differential rates (higher rates for marijuana sales, for example). There must be one uniform rate.”
However, Sands noted the state statute does allow statuary towns to impose “business” or “occupation” taxes.
“Our lodging occupation tax was based on this statute,” said Sands.
When the lodging occupation tax was originally imposed, two hotels in Eagle sued the town alleging that the flat $2 per night, per room tax was an unlawful income tax or sales tax. In a case that went all the way to the Colorado Supreme Court, the lodging occupation tax was upheld.
“In drafting the tax on retail marijuana, I patterned it after the town’s lodging occupation tax because I knew it had been approved of by the Colorado Supreme Court,” said Sands.
Sweet Leaf Pioneer owners David and Dieneka Manzanares were as surprised as town officials were to reach the $50,000 occupation tax collections threshold. “I don’t think anyone really thought we would get there so fast,” said Dieneka Manzanares. “We were surprised, but we were excited about it.”
As she was doing books Monday, Manzanares realized that the occupation tax collections had hit $50,000. “For us, it’s just an accounting issue. The people who are most excited about it are the local customers who come in. They get a break for the next six weeks,” she said.
On the business side, Manzanares noted that Sweet Leaf is the only retail marijuana operation in Eagle County that has to charge the extra $5 per transaction fee, so it is a boost to have that drop off for the last couple of months of 2014. But when 2015 dawns, the flat $5 fee will be back on and Manzanares said Sweet Leaf is content to charge the tax knowing it helps out the community’s coffers.
“I think it is more exciting for the citizens to know that they voted for this and we collect it and it’s going to the town,” she said. “This is something the citizens voted on, and they can see happening.”
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