Pot tax ‘holiday’ linked to state taxing provision
Buyers of recreational marijuana in Colorado will receive an unexpected 10 percent discount on Sept. 16 due to provisions in the state’s taxing laws that are also the subject of a November ballot question being put forward by state legislators.
But local retailers of the controlled substance that was made legal for recreational use and purchase in Colorado with voter approval of Amendment 64 three years ago, though welcoming of the so-called “tax holiday,” are not doing anything out of the ordinary to prepare for it.
“We could see a little more business, especially downvalley. But just the way the season runs in Aspen I don’t think it’s going to be a big deal,” said Jeff Kennedy, manager of the Green Dragon locations in Glenwood Springs and Aspen.
“People might spend a little more than they usually would,” he said. “But everyone is still limited on the recreational sales side on how much they can buy anyway.”
Amendment 64 restricts Colorado residents to purchasing no more than one ounce or equivalent of marijuana products in a single transaction, while nonresidents can buy only a quarter ounce at a time.
Dan Sullivan, who owns the Green Joint retail shop in Glenwood Springs, said he hadn’t given much thought to promoting the upcoming tax break until the question was posed to him Thursday.
“Maybe we should do a ‘come one, come all’ kind of thing,” he said. “It’s exciting that the state is giving us this one-day holiday, and it’s an absolutely great opportunity for our local customers to buy the same great stuff for less money.”
Cassandra Spencer, assistant manager at the Doctor’s Garden shop in Carbondale, said that business also is assessing how to prepare for next Wednesday.
“We will be meeting to discuss what we can and can’t do at this point,” she said. “Right now, we’re not sure how we will go about it.”
The tax break does pose a supply dilemma for pot retailers who may want to ensure they have plenty of product on hand to handle an increase in business that day.
But that could mean foregoing their own break on the 15 percent excise tax they pay marijuana wholesalers if they stock up beforehand and don’t restock before business closes that same day.
The tax break relates to Colorado’s Taxpayer’s Bill of Rights (TABOR), which requires voter approval for all new taxes.
In 2013, a year after legalizing recreational pot, state voters approved the 10 percent sales and 15 percent excise taxes.
In fact, voters were more supportive of the tax than they were for legalizing marijuana in the first place, points out state Sen. Pat Steadman, a member of the Legislature’s Joint Budget Committee, which unanimously approved Proposition BB for the Nov. 3 ballot.
“More people voted for the tax than for legalization, so clearly people wanted it taxed if it was to be made legal,” Steadman said during a recent visit with the Post Independent along with fellow JBC member Rep. Bob Rankin of Carbondale.
But TABOR requires that any new taxes be waived and refunded if overall state tax collections exceed projections given to voters when they approved the new taxes.
In the case of the 2013 marijuana tax question, voters were given a projection of $67 million for the first year. Taxes ended up generating about $66 million for the fiscal year ending June 30.
REFUND OR NOT?
But, because overall tax collections for the year exceeded projections, due mostly to the state’s better-than-expected economic recovery, Colorado must ask voters for permission to keep the marijuana tax money collected during 2014. Otherwise, it must refund 100 percent of those taxes.
To comply with another requirement that the taxes revert to zero once year-end fiscal numbers are certified on Sept. 15, lawmakers agreed to use the authority granted them in the 2013 vote to reset the tax rate. In doing so, they settled on the one-day tax waiver, Steadman explained.
Prop BB would keep the marijuana taxes in place, allocating $40 million for public school construction through the state Building Excellent Schools Today grant program and $12 million to fund marijuana education, substance abuse treatment and prevention, and youth mentoring services.
A no vote, however, would trigger a refund of all first-year tax collections.
That would amount to an average $8 rebate for each individual filing a state income tax return, or $25 million total, plus $24 million that would have to be refunded to marijuana cultivators and $17.1 million in refunds to retail purchasers through a reduction in the tax rate.
The state has set aside $58 million in the current-year budget to pay for the refunds, leaving an $8 million gap that would have to be covered out of the general fund.
“So, we are obviously asking for a yes vote to get us past this bump in the road,” Steadman said.
Douglas Bruce, the Colorado Springs anti-tax crusader who authored the TABOR Amendment in 1992, is opposed to the measure, as are a handful of legislators. So far, though, the marijuana industry has indicated it will not take a position on the measure.
Sullivan said he supports the effort to have the state keep and spend the taxes that have already been approved and collected.
“The voters of Colorado have said, ‘Yeah, if we’re going to have this stuff be legal it should be taxed,’” Sullivan said. “If there’s a technical glitch in that, it needs to be fixed.”
As for the tax holiday, marijuana won’t be completely tax-free that day. Regular state and local sales taxes will still apply, as will specially approved local marijuana taxes.
The Associated Press contributed to this report.