On September 16, Colorado will repeal any sales taxes on cannabis due to a quirk in the constitution. This is a one-time-only holiday and will not be repeated on a yearly basis, and is ultimately the result of a first-year fiscal glitch.
Colorado was the first state to legalize recreational marijuana, and what happened is that the provision is a part of a bigger bill that was signed by Governor John Hickenlooper. This one includes a ballot initiative this coming November and a permanent tax cut on cannabis sales in the recreational side in 2017.
As of July 2017, there will be a permanent sales-tax break on recreational pot which will cause the rate to be lowered from 10 to 8 percent. According to Hickenlooper, the reason for this is to try and get rid of the black market that exists for weed by lowering the price differential.
Senator Pat Steadman says that this is not a problem that will ever happen again and is really just a first-year glitch. It comes down to the Taxpayer’s Bill of Rights which requires voters to approve any new taxes based on estimates and state spending. If the actual amount is larger than the estimates were, then refunds will be given.
Basically, in plain English, this means that when Colorado collects more money than it thought it would, it is obliged to give some of it back. Problem with that is, they have no doubt already budgeted to spend that tax revenue and therefore giving it back will—in the State’s eyes—render a shortage on the proposed amount to place in school construction as was promised.
The glitch will not occur because Colorado is collecting more taxes on marijuana than estimated—in fact is is collecting less taxes from weed than anticipated—but because total state spending has exceeded the initial estimated. And this is thanks to an improving economy. This at least, is a good thing.
The result, is that in order to meet constitutional obligations, the state lawmakers have had to agree to remove sales tax for one day. This one day weed sales tax vacation will cost the state around $100,000. Don’t worry, they will restore it on September 17!
Now, that is not a pinch on the $3.6 million that the state is set to lose out on as a result of the one-day removal of the 15 percent excise tax on cannabis sales from growers to retailers.
According to The Denver Post, the big question, is what voters will decide to do with the excess tax revenue—about $58 million— that has already been collected. Colorado voters will get to decide to either let the state keep it and spend it on school construction, or demand that it is refunded to the cannabis cultivators via tax breaks on sales and production. (Should they vote for the latter, about $25 million will go back to Colorado taxpayers by sales tax refunds.)
Schools or pockets Colorado?
September 17 is a bit of a magic day. Firstly, is is the day after the end-of-year fiscal report is certified (and that is probably why it was chosen), but it is also the day after Mexican Independence Day, which falls on September 16. Coincidental when you consider the history of cannabis and the reasons that it was made illegal in the first place. Historically, the word marijuana might have been considered a racist term, and some say that the whole prohibition on cannabis was started upon a racist agenda.
Of course that state really wants Colorado taxpayer to elect to let them keep the money, but that will be difficult. Some anti-tax groups would do anything rather than let that happen, and already have sights set on a refund. Cannabis in Colorado is a new legal industry, and this is certainly a learning curb the state will not forget in a hurry.
Colorado is right in the middle of making marijuana history in so many ways. Not only is the weed scene growing and buzzing, but there is so much to do as a tourist in the Rocky Mountains. Denver cannabis accommodations can be found with Bud and Breakfast of course for those out-of-state travelers who are interested in catching a bit of 420 tourism for themselves.