As Colorado and Washington continue to experiment with legalized marijuana, state lawmakers’ attention has turned to preserving the new revenues and tweaking tax provisions. Meanwhile, at least nine other state legislatures this year have considered proposals to legalize and tax marijuana sales.
Colorado has made $59.4 million in marijuana tax revenue, according to data from the Colorado Department of Revenue, for sales and excise taxes so far for fiscal year 2014-15, which began in July. Including marijuana licensing and other fees, the total marijuana revenue reached approximately $70.5 million.
However, the state may not get to spend all of that money.
Marijuana revenues are subject to Colorado's Taxpayer Bill of Rights (TABOR), meaning that residents can expect to receive a refund of excess tax money if revenues exceed constitutional limits. The Colorado Legislative Council estimates that approximately $58 million in marijuana tax revenue from fiscal year 2014-15 will be refunded to taxpayers in fiscal year 2015-16, according to a March 2015 forecast report. The actual refunded amount will be capped at the total amount of taxes collected.
But even though a refund means extra money in taxpayer pockets, state officials are looking at ways to keep it.
Legislators that would like to spend these excess revenues are crafting a proposal that will exempt marijuana revenues from TABOR, allowing the state to use excess revenues on programs like the school construction fund that is supposed to receive the first $40 million of excise tax revenue annually. Voters would have to approve any changes to TABOR, and that opportunity may come as soon as this fall’s election, in order to go into effect before the 2015 tax filing season begins.
Washington is dealing with its own set of marijuana tax woes and is reevaluating its entire approach to marijuana taxes. Currently, marijuana is taxed at three points: a 25 percent tax on each wholesale sale from producers to processors, a 25 percent tax on each wholesale sale from processors to retailers and a 25 percent tax on each retail sale.
To eliminate the price disparity between recreational and medical marijuana, because medical marijuana is not subject to the 25 percent excise taxes, the Legislature is considering two bills aimed at equalizing the marketplace within Washington and ultimately leading to increased tax revenues.
S.B. 6062 would eliminate the three points of tax and impose a 37 percent excise tax on each retail sale of marijuana or marijuana products. This change would lead to lower recreational marijuana prices, making legal marijuana more affordable. S.B. 5052 would substantially reform Washington's medical marijuana program and apply regulations used for the state's recreational marijuana market to the medical marijuana market, as well as impose specific medical marijuana regulations. Both bills have been passed by the state Senate and are under consideration by the House.
While Colorado and Washington refine their marijuana tax systems, other states are considering whether to legalize marijuana. Here is a list of some of the legalization/taxation legislation that has been introduced this year:
Two states may impose excise taxes on medical marijuana if they enact medical marijuana legislation. S.B. 326 in Alabama would impose an additional 2.5 percent sales tax on all medical marijuana sales. Pennsylvania’s S.B. 3 would impose a 6 percent surcharge on marijuana when it is first sold to medical cannabis dispensers.
The general assemblies of Connecticut (H.B. 6703), Georgia (S.B. 198) and Pennsylvania (S.B. 528) are also considering marijuana legalization bills, although the legislation does not include specific tax rate information.
Ballot initiative efforts are underway in Mississippi, Missouri, Ohio and Nevada that would legalize and tax in those states. Ohio’s initiative may come as soon as this fall; Nevada’s initiative is set for the November 2016 ballot.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should Colorado marijuana revenue be included in the TABOR refund or retained and spent by the state?
For more information about state tax issues, sign up for a free trial of the Bloomberg BNA Premier State Tax Library.
by Annabelle Gibson
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)