Avalara Taxrates > Blog > Sales Tax News > Recreational Pot Gets Federal Blessing - Avalara

Recreational Pot Gets Federal Blessing

  • Aug 30, 2013 | Gail Cole

 Feds won't stop folks in WA and CO from enjoying pot recreationally, so long as they abide by the state law.

Earlier this week, United States Attorney General Eric Holder reached out to the governors of Washington and Colorado, the two states that are in the process of legalizing recreational marijuana. The attorney general reportedly told the governors that the Justice Department (DOJ) will take a 'trust but verify" approach toward recreational pot. So long as the states implement "a sound, workable regulatory structure," the DOJ will not "prevent the implementation of the marijuana laws."

The DOJ is backing up its new, more relaxed, attitude by reversing the "administration policy that had warned banks not to work with marijuana businesses." In November 2012, CNN reported, "Those who aspire to open a pot business in Colorado or Washington will … run into trouble when looking for a bank to borrow funds or manage everyday finances. Major banks avoid doing business with those in the marijuana industry, because they fear federal agencies will charge them with drug racketeering and money laundering." This week, an official from the DOJ admitted that the department now recognizes that "forcing [marijuana] establishments to operate on a cash basis put[s] them at a greater risk of robbery and violence." It is also difficult to regulate a cash industry, and everyone involved agrees regulating the marijuana industry is essential.

The DOJ's more lenient response has taken many by surprise. Ethan Nadelmann, executive director of the Drug Policy Alliance (which favors less strict laws for marijuana), admitted he was "expecting a yellow light from the White House. But this light looks a lot more greenish…." And Senator Patrick Leahy (D-VT) said he was pleased to see the DOJ would respect the will of the states and spend their "scarce" resources on "countering and prosecuting violent crime."

Not everyone approves of that green light, of course. According to Iowa Senator Chuck Grassley (R), the DOJ's stance "sends the wrong message to both law enforcement and violators of federal law." Echoing that sentiment, the executive director of the Drug Free America Foundation called the approach "… a tsunami in the works."

Yet the governors of Colorado and Washington both sounded relieved in their statements regarding the attorney general's announcement.

Governor John Hickenlooper (D): "We recognize how difficult this issue has been for the Department of Justice and we appreciate the thoughtful approach it has taken. Amendment 64 put Colorado in conflict with federal law. Today's announcement shows the federal government is respecting the will of Colorado voters."

Governor Jay Inslee (D) (in a joint statement with WA Attorney General Bob Ferguson): "We want to thank the Attorney General for working with the states on this and for finding a way that allows our initiative to move forward while maintaining a commitment to fighting illegal drugs. This reflects a balanced approach by the federal government that respects the states' interests in implementing these laws and recognizes the federal government's role in fighting illegal drugs and criminal activity."

The statement from the Evergreen State also underscored that "the federal government will continue to enforce the federal Controlled Substance Act by focusing its enforcement on eight specific concerns… ." Those concerns include the need to prevent distribution to minors and keep Washington-grown marijuana within the state's borders.

The governor and attorney general of Washington promised that "Washington state will remain vigilant in enforcing laws against the illicit marijuana market." Similarly, Gov. Hickenlooper said, "We are also determined to keep marijuana businesses from being fronts for criminal enterprises or other illegal activity, and we are committed to preventing the exportation of marijuana out of Colorado while also enhancing efforts to keep state roads safer from impaired drivers."

Colorado is on track to "finalize rules by October that would govern pot sales," and voters will be asked to approve the rate of sales tax on recreational pot in the November election. In Washington, the Liquor Control Board is still determining how many retail locations for recreational weed will be allowed. Washington will start to accept license applications from retailers and growers in September. (wsj.com).

Get Free Tax Rate Tables

Colorado State Rates

photo credit: smokershighlife via photopin cc

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.