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Colorado’s Pot Sales Tax Holiday, September 2015

  • Jun 5, 2015 | Gail Cole

 Colorado's marijuana industry is thriving.

Updated 8.24.2015: The Colorado Department of Revenue has published information on the September 16, 2015, retail marijuana tax reduction. The tax reduction also applies to the 15% state retail marijuana excise tax on any first time sales or transfers made on September 16, 2015.

For one day and one day only, pot sold in Colorado will be exempt from the special 10% tax on recreational marijuana. Sellers take note: the exemption is in effect only on September 16, 2015, and it applies to the 10% state retail marijuana tax. Regular state and local sales taxes will still apply.

This unconventional sales tax holiday is the result of “an obscure provision in the state constitution’s Taxpayer’s Bill of Rights (TABOR)” that requires refunds to be distributed if actual tax collections exceed estimates, as well as the response to that provision. TABOR reads, in relevant part:

“Except by later voter approval, if a tax increase or fiscal year spending exceeds any estimate in (b) (iii) for the same fiscal year, the tax increase is thereafter reduced up to 100% in proportion to the combined dollar excess, and the combined excess revenue refunded in the next fiscal year” Article X, Section 20 (3)(c).

After the enactment of House Bill 15-1367, says bill author Senator Pat Steadman (D-Denver), “We’ll never have this problem again.” The measure eliminates the sales tax for one day “to meet the constitutional obligations” and then restores it to the previous rate. The new law reads as follows (in relevant part):

“If, for the fiscal year 2014-15, fiscal year spending is greater than twelve billion eighty million dollars or if the revenue from retail marijuana taxes is greater than sixty-seven million dollars, then on September 16, 2015, the rate of the tax … is reduced as specified in Section 20 (3)(c) of Article X of the State Constitution. On September 17, 2015… the rate is increased back to ten percent.”

According to the Denver Post, the one-day sales tax holiday “is expected to cost the state about $100,000. The bigger price tag — $3.6 million — is what the state anticipates losing in revenue for a one-day elimination of the 15 percent excise tax on marijuana sales from cultivators to retailers.”

Rate reduction

In addition to creating the unorthodox sales tax holiday, HB 15-1367 decreases the 10% special tax on marijuana to 8%, effective July 1, 2017. Since voters approved proposition AA in November 2013, the general assembly has the authority to decrease or increase the rate of the retail marijuana sales tax and excise tax without voter approval, provided neither rate exceeds 15%.

Governor Hickenlooper hopes the reduced rate of tax will help eliminate the black market for marijuana, which still exists in Colorado. He must be an optimist: he also hopes retail marijuana will close shop on September 16.

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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.