Colorado has long rejected tax holidays on things like school supplies, clothing, and energy efficient appliances, but on September 16th, the state will be giving a tax break on the sale of marijuana.
A loophole in the tax laws are requiring the state to issue the holiday which will waive the 10% sales tax collected by retailers and the 15% excise tax on grower to retailer transactions. Officials save said that it may cost up to $4 million to lose tax revenue for a day. Retailers are expecting enormous crowds and are already preparing for the influx of potheads banging down their doors.
The state decriminalized use and possession of cannabis in 2012 and made provisions for retail sales in 2013. A year of sales has brought the amount of collected tax into question. Senator Pat Steadman, a Colorado Democrat, claims the issue will not arise again and that, “This is only a first-year problem.”
The “Stoner Holiday” that will shave $20 off the price of each ounce is an accidental gift from conservatives. After the permanent implementation of the Taxpayer’s Bill of Rights (TABOR) in 2005 voters must approve new taxes based on a formula based on state spending, collections, and population growth. If the amount collected is more than the estimates, the state is expected to issue refunds. Colorado is not actually collecting more pot taxes than estimated, in fact less is being collected than anticipated. But total state spending threw off the equation because of overall improvements to the economy. For reasons like this, many other states have criticized TABOR and have refused to enact it themselves.
When TABOR is triggered the tax rate is required to be cut to zero. The holiday is meant to appease this concession. A permanent decrease in the sales tax of marijuana to 8% is set to take effect in 2017 in order to more accurately represent a “fair tax” and to help control black market sales by minimizing the discrepancy of legal prices to street sales.
A vote will be held to determine whether or not the state can keep the excess tax collected. Citizens will be expected to turn up for a populous vote about the issue. Should the vote be “Yes”, the first $40 million will be used for school construction; a vote of “No” would see the money being refunded through tax refunds to growers and retailers, and the rest would be added to the refunds of citizens. It is not expected that the vote will garner much attention.
The curious predicament of the Colorado legislature will doubtless be widely debated as other states consider the legalization of medical and recreational marijuana.