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Colorado Voters Support Taxes on Recreational Marijuana

  • Nov 6, 2013 | Gail Cole

 Colorado voters say "YES" to various marijuana taxes.

Voters in Colorado have approved Proposition AA, two statewide taxes on recreational marijuana. As of this writing, Proposition AA has passed 65% to 35%. Voter turnout is just under 35%.

State marijuana tax

Colorado’s new state taxes on recreational marijuana are impressive: a 15% excise tax on wholesales from a cultivation facility and a 10% sales tax on retail sales. The combined 25% tax is in addition to the 2.9% state sales tax and any local taxes imposed.

In addition, the Colorado legislature now has permission to “adjust the excise and sales taxes in the future, with the requirement that they both cannot exceed 15% percent.” Under the Colorado Taxpayer Bill of Rights (TABOR), "state and local governments cannot raise tax rates without voter approval and cannot spend revenues collected under existing tax rates if revenue grows faster than the rate of inflation and population growth, without voter approval.” Proposition AA provides that voter approval, with limits.

The state expects to gain $70 million a year from the recreational pot taxes. Together they will fund school construction projects and marijuana regulations. “The first $40 million generated by the excise tax each year” is earmarked for public school construction. 15% of the sales tax revenue goes towards “the cities and counties where retail marijuana purchases occur.” Any additional excise and sales tax revenue is slotted for “regulation and enforcement of the rules created for recreational marijuana….”

Mike Elliot, executive director of the Medical Marijuana Industry Group (MMIG) notes that it’s “rare for an industry to lead and a campaign to tax itself.” MMIG stands behind Proposition AA, which it calls “a reasonable and responsible way forward” and which creates “a strong and well-funded regulatory system, along with funding for education, prevention, treatment, and other safety issues that may arise.”

Denver marijuana tax

Voters in Denver also approved a local 3.5% tax on retail sales of recreational marijuana. As of this writing, more than 90,000 voters support the tax while roughly 41,500 are against it.

Like Proposition AA, Question 2A allows the rate of tax “to be increased or decreased without further voter approval so long as the rate of taxation does not exceed 15%, and with the resulting tax revenue being allowed to be collected and spent notwithstanding any limitations provided by law.”

The city of Denver anticipates earning close to $4.5 million annually from this tax.

Other city marijuana taxes

Boulder voters have approved Issue No. 2A, which imposes “an excise tax of 5 percent in 2014 and up to 10 percent thereafter on the cultivation facility at the average market rate at the point of transfer from the cultivation facility and an additional sales and use tax of 3.5 percent in 2014 and up to 10 percent thereafter on recreational marijuana ….”

Littleton voters have approved Issue 2E, which imposes a “tax of three percent (3%) of the purchase price paid or charged for sales of retail marijuana and retail marijuana products in the City of Littleton in addition to the sales tax and any other state tax imposed on such sales of retail marijuana and retail marijuana products.”

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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.