Extras on Excise: Get Ready Colorado – Lower Marijuana Taxes May Be Coming


Get ready Coloradans! The Colorado General Assembly passed a bill on May 6 that would ask voters to exempt marijuana revenues from the state’s Taxpayer Bill of Rights (TABOR) and would lower the special sales tax rate on marijuana. The bill is meant to address the potential refund of an estimated $58 million in retail marijuana tax revenue under TABOR.

State officials would like to keep the excess money and use it for programs such as the Public School Capital Construction Assistance Fund, which receives funding from marijuana tax revenues, instead of refunding the money to taxpayers as required by TABOR. But to do this, Coloradans must give their approval.

That is where HB. 15-1367 comes in. The bill would put the question to a vote during the November 2015 election and voters can approve or reject a proposal for the state to keep and spend the revenue. The following question will be posed to Coloradans if the bill is enacted:

“May the State retain and spend state revenues that otherwise would be refunded for exceeding an estimate included in the ballot information booklet for Proposition AA and use these revenues to provide for forty million dollars for public school building construction and for other needs, such as law enforcement, youth programs, and marijuana education programs, instead of refunding these revenues to retail marijuana cultivation facilities, retail marijuana purchasers, and other taxpayers?”

If voters approve the issue, $40 million of the $58 million excess tax revenue would be transferred to the Public School Capital Construction Assistance Fund, $12 million would be transferred to the Marijuana Tax Cash Fund (MTCF), and the remaining $6 million would remain in the state’s general fund.

If voters reject the issue, the bill sets out the procedures for refunding excess marijuana revenues, which include a $25 million dollar refund via Colorado’s six-tier sales tax refund model, a $19.7 million refund directly to marijuana cultivators who pay the 15 percent excise tax, and a temporary marijuana special sales tax rate reduction during the early months of 2016.

The bill also would provide other benefits to the legal marijuana industry that go into effect whether or not the ballot issue is approved or rejected. 

For instance, on Sept. 16, 2015, the retail marijuana excise and special sales tax rates would be lowered to zero percent for one day only, as required by Colorado law. This means that marijuana cultivators who transfer marijuana to other facilities and retail stores would not have to pay the 15 percent excise tax that day. And individuals who purchase marijuana on the 16th would not have to pay the 10 percent special sales tax, making marijuana cheaper for consumers. (The regular state sales tax and any applicable local sales taxes would still apply.)

Altogether, because the state expects participants in the marijuana industry to tax advantage of the zero tax day, Colorado could lose over $3 million dollars in tax revenue, according to estimates by the Colorado Legislative Council.

On Sept. 17, 2015, both tax rates would return to normal.

Additionally, beginning July 1, 2017, the retail marijuana special sales tax rate would be reduced from 10 percent to 8 percent, which would lower the final price for consumers.

The bill was sent to Gov. John Hickenlooper (D) for his signature on May 18 and the governor has 30 days to act or the bill becomes law without a signature.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should Colorado keep marijuana tax revenue instead of refunding it to taxpayers?

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