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Colorado Task Force and Recreational Marijuana

  • Mar 4, 2013 | Gail Cole

 Done. Now Colorado Looks at Implementation.

When voters in Washington State and Colorado approved Initiative 502 and Amendment 64 respectively, those states took the first steps toward making recreational marijuana legal. Both states are now grappling with the social and revenue implications of legalizing marijuana. It is a lengthy process that involves task forces, public hearings, and regulatory retooling.

Last week, the Colorado Amendment 64 Implementation Task Force concluded its meetings and endorsed several proposals.  The goal of the Task Force is to "find practical and pragmatic solutions to the challenges of implementing Amendment 64, while at all times respecting the diverse perspectives that each member [brings] to the work of the Task Force." In addition, the Task Force "shall respect the will of the voters of Colorado and shall not engage in a debate of the merits of marijuana legalization or Amendment 64." It spent almost three months examining legalization, which encompasses approximately 100 separate issues.

The Denver Post reported "proposals [for recreational marijuana] endorsed by the Amendment 64 Implementation Task Force." These include, but are not limited to, the following:

  • Recreational marijuana would be subject to a 15% excise tax;
  • Recreational marijuana would be subject to a special marijuana sales tax;
  • Recreational marijuana would be grown only indoors;
  • Recreational marijuana would be banned in public spaces such as restaurants, bars, or social clubs;
  • Recreational marijuana would be subject to advertising restrictions;

More specific details will be available next week, after the final report is released.

Tax was a featured topic during the final meeting of the Implementation Task Force. The 15% excise tax on recreational marijuana at the wholesale level, the marijuana sales tax, and state and local level sales taxes would amount to approximately $7 in taxes on 1/8 of an ounce of marijuana.

Barbara Brohl, Executive Director of the Colorado Department of Revenue, points out that tax revenue is needed to regulate the new industry. She has said that "a lack of money has hindered regulation" of the medical marijuana industry. Yet opponents to heavy taxes on recreational marijuana tax worry that "imposing too high of a rate will keep marijuana sellers in the black market." (The Denver Post).

The Huffington Post reports that both proponents and critics of legalization "agree that taxes should be hefty." Tax revenue generated by marijuana sales "must fund marijuana safety enforcement and drug education measures." But finding the balance -- high enough to fund programs but not so high buyers go underground -- is tricky.

Finding accurate data is also tricky, since the recreational marijuana industry doesn't yet exist. Colorado regulators expressed exasperation while trying to guess what the market will be. "It's all a mythical figure," pointed out Tamra Ward of the Denver business group called Colorado Connect. (The Huffington Post).

No matter what the final report of the Amendment 64 Implementation Task Force recommends, Colorado voters will have the final say on taxes. That's because of the state's Taxpayer Bill of Rights (TABOR). "Under TABOR, state and local governments cannot raise tax rates without voter approval and cannot spend revenues collected under existing tax rates if revenues grow faster than the rate of inflation and population growth, without voter approval."

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.