A Summit County voter guide to local and state marijuana tax initiatives
January 24, 2014
Summit County voters are a week away from determining the fate of a slew of marijuana tax initiatives at both the state and local levels.
Among those ballot questions is a state initiative to tax retail marijuana sales, which will become legal Jan. 1, 2014 following last year's passage of Amendment 64. The tax, if approved by voters, would apply to existing medical marijuana dispensary owners who may file for a retail business license transfer or add a retail component to their already established dispensaries after the first of the year.
The ballot question, known as Proposition AA, was drafted to generate additional funding to manage and enforce a broad range of regulations, as well as increase funding for public school projects. If passed, state officials estimate Proposition AA would generate more than $70 million in increased state revenues during the first fiscal year through the implementation of a 10 percent sales tax and a 15 percent excise tax, according to ballot language.
Although revenues would likely fluctuate in future years, proponents of Proposition AA have backed the initiative because the first $40 million in annual revenue generated by the excise tax would fund the state's Building Excellent Schools Today program for public school capital construction projects. The initiative also is highly touted among supporters because revenues generated by the 10 percent sales tax would be used to fund enforcement of the regulations governing the retail marijuana industry, as well as provide public education campaigns about the possible health and safety concerns of marijuana.
“It’s a difficult job for everybody because we just don’t know yet how the state plans to regulate the industry,” Brown said. “Until we start to figure these things out, we’re going to need extra money to provide those services for things like enforcement.”
Supporters also are quick to point out the sales tax only applies to those who purchase marijuana and that the taxes are fair in comparison to similar proposals in Washington state, where there are concerns taxes would be so high more people would turn to the black market to purchase marijuana.
But opponents of Proposition AA say Colorado's total proposed tax on retail marijuana sales of 25 percent is excessive to the point of essentially prohibiting any legal use of the drug and undermines the initial purpose of Amendment 64, which was to regulate marijuana in much the same way as alcohol.
Robert J. Corry Jr., one of the original framers and supporters of Amendment 64, recently wrote excessive taxation is essentially another form of prohibition and that the alcohol industry, by comparison, pays less than 1 percent in annual state excise taxes.
"Colorado has never taxed a particular industry or product at this high of a rate," Corry wrote in a Fort Collins Coloradoan guest column.
"Proposition AA would re-establish Prohibition and drive marijuana back underground, to the detriment of all Coloradans."
Retail marijuana in Summit County
At the local level, three of Summit County's four incorporated towns are proposing similar tax initiatives. The town of Dillon is the only local municipality that does not feature a marijuana-related ballot question, as its elected officials opted in September to pass a moratorium on retail marijuana establishments until October 2014.
On the other hand, the Breckenridge, Frisco and Silverthorne town councils all approved earlier this year presenting a 5 percent excise tax on retail marijuana sales to voters. The questions all specifically deal with retail sales and do not affect ongoing sales of medicinal marijuana.
If passed in Breckenridge, Referred Issue 2C would generate an estimated $750,000 in additional tax revenue. Those funds would be used to provide training, enforcement and administration of all marijuana-related laws, as well as offset the costs associated with the anticipated need for additional drug and alcohol programs.
Referred Issue 2F in Silverthorne is estimated to generate $100,000 in additional revenue. Those funds would be used for increased mental health services and driving under the influence enforcement.
Frisco's Referred Issue 2A would increase tax revenues by an estimated $275,000, but Frisco's ballot question does not specifically state how those funds would be spent if the initiative passes.
But much of the controversy in Summit County over retail marijuana has been focused on local regulations and not necessarily on tax proposals. Although many of the towns have passed regulations that closely mirror those already in place for medicinal marijuana, rifts have developed in Breckenridge over the desire of some local officials to push existing dispensaries and future retail establishments away from downtown.
Similar controversies have brewed in Frisco and Silverthorne as well. In Frisco, local elected officials tried to limit the number of retail stores in town, while the Silverthorne Town Council decided to prohibit large-scale wholesale grow operations.
But town officials did garner some support from the industry when it began to draft its excise tax initiatives, even though budding retail marijuana establishment owners could be forced to pay both state and local sales and excise taxes.
One of those supporters is Nick Brown, owner of High Country Healing in Silverthorne, who said earlier this year he has plans to open a retail marijuana establishment after Jan. 1, 2014. Should Proposition AA and Silverthorne's Referred Issue 2E both pass, Brown would be subject to a combined tax rate of 37.775 percent of his retail marijuana sales.
But nothing has changed in Brown's support of Proposition AA and Referred Issue 2F, saying Monday that the state still hasn't provided clear direction on how it plans to regulate retail marijuana. Without clear direction from the state, in terms establishing guidelines on the number of plants and how much sellable marijuana a store can have on hand, it would be impossible for local municipalities to accurately gauge how much more funding it would need to provide enforcement and mental health services, Brown said.
"It's a difficult job for everybody because we just don't know yet how the state plans to regulate the industry," Brown said. "Until we start to figure these things out, we're going to need extra money to provide those services for things like enforcement."
And although losing nearly 40 percent of his profits to taxes is a tough pill to swallow, the fact that Silverthorne's excise tax would sunset Dec. 31, 2014 makes supporting the initiatives a little easier to stomach, Brown said. After this first go around local business owners will have ample time to work with elected officials on new tax rules that make more sense for each municipality. Excise taxes in Breckenridge and Frisco, if approved, would also sunset at the end of next year.