Sales Tax Slice: Colorado Voters Approve “High”er Sales Tax Rate for Recreational Marijuana


Colorado’s recreational marijuana users will pay sales tax at a higher rate than the state imposes on other items, once Colorado permits retail sales to begin in January. 

At the beginning of November, 65 percent of Colorado voters approved Proposition AA -- which includes a 15 percent excise tax on retail marijuana, as well as an additional 10 percent sales tax on retail marijuana sales. This is over and above the regular 2.9 percent state sales tax rate.   If a local jurisdiction imposes its own local sales tax, retail marijuana sales will also be subject to that. 

The tax provisions related to retail marijuana sales passed the Colorado legislature in May and were sent to the voters for approval under Colorado’s Taxpayer Bill of Rights, which requires taxpayer approval of tax hikes.  But the state won’t have to keep seeking voter approval of every tax rate change now, because Proposition AA allows the state to change the rates if neither the excise nor sales tax rates are more than 15 percent.

Some of the excise tax funds will be used for public school capital construction, while additional sales tax money will be put toward enforcement of the marijuana provisions.

Washington is only other state that is set to allow recreational marijuana use, and started permitting businesses and individuals to apply for recreational marijuana business licenses on Nov. 18.

Continue the discussion on BBNA’s State Tax Group on LinkedIn: Should recreational marijuana be subject to a higher sales tax than other retail items?

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