Extras on Excise: Is the Colorado Marijuana Tax Lawsuit a Party Foul?

It’s now legal to smoke pot in Colorado. Who would be the least likely people to make a legal challenge to this state of affairs? Marijuana advocates, you say? You’re right! A group of prominent marijuana users is protesting the taxes being imposed on their beloved weed. By doing so, they seem willing to throw the baby (i.e., legal sales of recreational marijuana) out with the bath water (i.e., taxes).

On June 9, four named plaintiffs and potential class participants filed a lawsuit challenging the constitutionality of Colorado marijuana taxes. The plaintiffs filed the lawsuit through Robert Corry, an attorney who played a role in Colorado’s passing of the Amendment 64 ballot initiative to legalize recreational marijuana in Colorado.

The complaint is an entertaining read that starts its “Factual background and general allegations” section by discussing God making marijuana available to all of mankind in the book of Genesis. Reading the complaint also teaches about how our forefathers grew pot regularly in their farms and plantations, and that the Declaration of Independence was written on hemp paper. That’s right, the fabric of our modern democracy was literally woven with the hemp from marijuana plants of the 18th century.

The lawsuit has two main arguments:

  1. Marijuana is taxed at a much higher rate than alcohol, against the policy of Colorado’s Amendment 64, which calls for marijuana to be taxed in a manner similar to alcohol.
  2. Regulations for marijuana tax returns identify retailers of marijuana and require retailers to incriminate themselves in violation of the 5th amendment protections against self-incrimination.  

Though the lawsuit seeks an injunction on behalf of all marijuana cultivators and retailers in Colorado, much of Amendment 64’s advocates want nothing to do with it. If successful, the lawsuit may not only stop the marijuana tax revenues from pouring in, but it may also threaten the recreational marijuana regulatory framework that the marijuana taxes are built upon. Is this lawsuit potentially blowing Colorado’s high?

“It’s more of a publicity stunt,” said Brian Vicente, marijuana legalization advocate and co-director of the Colorado Amendment 64 campaign.

Vicente knows Corry--they briefly worked together during the Amendment 64 campaign. However, Vicente and Corry are apparently on opposite sides of this issue. While Corry filed the lawsuit, Vicente finds it to be “reckless and not very well thought out,” and is “fostering anti-tax sentiments.” Bloomberg BNA was unable to contact Corry for comment.

The bios in the first four pages of the lawsuit indicate that the named plaintiffs were carefully selected to convey legitimacy and merit to the complaint. First mentioned is Larisa Bolivar, former operator of “the first Marijuana Dispensary in Colorado history” and current marijuana studies master’s degree student at Regis University. Second is Miguel Lopez, leader of the annual 420 Rally in Denver on each marijuana “holiday,” April 20. Third is William Chengelis, chairman of the U.S. Marijuana Party and “Vietman-era U.S. Army veteran who suffers from Post Traumatic Stress Disorder (PTSD).”  Finally, Kathleen Chippi, founder of the Patient and Caregiver Rights Litigation Project. The lawsuit describes the named plaintiffs as marijuana consumers who pay “increased taxes for purchases of marijuana…”

Each plaintiff has a title that shows leadership in the recreational marijuana movement, and this contributes to the public portrayal that the leadership of recreational marijuana does not want to pay any marijuana taxes.

Regardless of the case’s merits, Corry at least has an impressive cast of plaintiffs that are bringing this suit. One of those plaintiffs, William Chengelis, has PTSD, and this highlights one of Colorado’s controversial issues with medical marijuana. Colorado does not include PTSD in its list of qualifying medical conditions for medical marijuana, so absent any other qualifying conditions, people like Chengelis must resort to the taxed recreational variety of marijuana.

Vicente is not sold on the merits and believes the lawsuit has little chance of surviving because “the government has a long history of taxing products that are both legal and illegal, just look at Al Capone.” Indeed, many states already impose taxes and fees on marijuana and other illegal controlled substances.

Ironically, Al Capone was caught evading taxes relating to a different prohibition: alcohol. The Al Capone argument may work for either side of this issue.

Continue the discussion on Bloomberg BNA's State Tax Group on LinkedIn: Is the Marijuana Tax Lawsuit a Party Foul?

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