Election Guide 2013: Proposition AA would enact taxes on legal retail marijuana
October 16, 2013
Shall state taxes be increased by $70,000,000 annually in the first full fiscal year and by such amounts as are raised annually thereafter by imposing an excise tax of 15% when unprocessed retail marijuana is first sold or transferred by a retail marijuana cultivation facility with the first $40,000,000 of tax revenues being used for public school capital construction as required by the state constitution, and by imposing an additional sales tax of 10% on the sale of retail marijuana and retail marijuana products with the tax revenues being used to fund the enforcement of regulations on the retail marijuana industry and other costs related to the implementation of the use and regulation of retail marijuana as approved by the voters, with the rate of either or both taxes being allowed to be decreased or increased without further voter approval so long as the rate of either tax does not exceed 15%, and with the resulting tax revenue being allowed to be collected and spent notwithstanding any limitations provided by law?
Steamboat Springs — With the passage of Amendment 64 last year, which legalized retail marijuana for those 21 and older, the Colorado Legislature was directed to enact an excise tax to benefit public school construction.
Proposition AA would "impose a 15 percent excise tax on the average wholesale price of retail marijuana when the product is first sold or transferred by a retail marijuana cultivation facility," according to the Committee for Responsible Regulation, which is campaigning for the measure.
The first $40 million of revenue from the excise tax would go to the Building Excellent Schools Today program and new school construction.
The measure also would institute a 10 percent sales tax in addition to the state's existing 2.9 percent tax. This tax would go to fund industry regulation and enforcement in addition to related health, education and public safety costs.
Proposition AA includes language to direct 15 percent of the sales tax to cities or towns where retail marijuana sales are located and sales tax is collected. Counties will also receive a distribution based on a formula for sales in unincorporated areas of the county. The proposition also allows the Colorado Legislature to alter the excise and sales tax rates provided neither goes above 15 percent.
According to the No on Proposition AA campaign, the proposed tax rates are excessive and that overtaxation could drive marijuana sales back into the black market.
Rocky Mountain Remedies co-owner Kevin Fisher, of Steamboat Springs, said that he supports passage of Proposition AA.
He said the voters who approved Amendment 64 were promised an excise tax for schools, and he wants to make sure they get that. The federal government wants to see the regulation and enforcement fully funded, Fisher said, making the sales tax necessary.
However, Fisher said, he will be politically active in working to get regular audits instituted to make sure the 10 percent sales tax is not resulting in a surplus not being used for regulation.
Proposition AA is estimated to increase state excise tax revenue by $27.5 million annually, according to Legislative Council staff. That amount is projected to stay under the $40 million cap earmarked for school construction for at least the first two years. If excise tax revenue from retail marijuana were to surpass $40 million per year, the difference would go toward regulation.
Colorado sales tax revenue is expected to increase $36.5 million. Of the 15 percent earmarked for cities and counties where retail marijuana sales take place, local governments would receive an amount proportionate to the percentage of sales in each district.
The Legislature is required to determine annually between April 1, 2014, and April 1, 2016, if the revenue allocated to local governments is set at the appropriate level.
Areas that ban retail marijuana sales will not receive any additional sales tax revenue. The proposed taxes will not apply to medical marijuana, which is subject to local sales taxes and the state's 2.9 percent sales tax.
Amendment 64 limited the state excise tax at 15 percent until Jan. 1, 2017. After that time, the rate could be set at any amount by the Legislature, the governor's signature and approval of a ballot measure, as required by the Taxpayer Bill of Rights.
If Proposition AA does not pass, retail marijuana sales still will be legal.