Taxing Marijuana: The Washington And Colorado Experience

[bobandtorey]

 

• Because marijuana can be purchased as a cigarette, an edible, a liquid, or vapor, all with a wide variety of concentrations, a specific excise tax is untenable.
• Colorado collects tax revenue from marijuana sales through a 15 percent excise based tax on the average wholesale market rate; a 10 percent state tax on retail marijuana sales; a state sales tax of 2.9 percent; varied local sales taxes; and local marijuana taxes such as a 3.5 percent tax in Denver.
• Washington State collects tax revenue from marijuana sales through a 25 percent tax on producer sales to processors; a 25 percent tax on processor sales to retailers; a 25 percent tax on retailer sales to customers; a state Business & Occupation (B&O) gross receipts tax; a state sales tax of 6.5 percent; and varied local sales taxes. The total effective tax rate to be about 44 percent.
• Tax collections in Colorado have fallen short of projected revenue estimates, whereas collections in Washington have fallen within the wide range of project revenue estimates.
• Colorado's marijuana revenue shortfall is due to incorrect projections about the switch from lower-taxed medical marijuana to higher-taxed retail marijuana by consumers.
• States with possible upcoming ballot initiatives should take note of effective and ineffective methods of taxing marijuana as the issue is likely to expand.

In November 2012, voters in Colorado and Washington State approved legal retail sales of marijuana, with Colorado sales starting January 1, 2014 and Washington sales starting June 1, 2014. The ballot initiatives passed by strong margins (Colorado Amendment 64 passed 55 percent to 45 percent; Washington Initiative 502 passed 56 percent to 44 percent). Retail sales would be separate from each state’s preexisting medical marijuana programs.

Creating a legal structure out of whole cloth has been challenging. In both states, sales are for adults age 21 or over, it remains illegal to use in public and to drive under the influence, and taking marijuana outside the state is illegal. (Neighboring states are still impacted, however.[1]) In Washington, adults can purchase up to one ounce of “bud” (the flowering part of the plant), 16 ounces of edible solids, 72 ounces of edible liquids, or 7 grams of concentrates or lotions. In Colorado, residents can purchase up to one ounce of any kind of marijuana product and non-residents can purchase up to a quarter of an ounce. Sellers must be licensed and must meet health and safety requirements, employers can still ban use by employees, and Washington capped the number of retail locations. The product is still against federal law, which in turn keeps the nascent industry on a cash basis and may lead to punitive federal tax treatment.[2]

Taxing marijuana presents unique challenges, because the product takes so many different forms. Excise taxes on other products are historically imposed at a specific amount regardless of the retail price. Examples include the federal gasoline tax of 18.4 cents per gallon and the federal cigarette tax of $1.0066 per pack. Because marijuana can be purchased as a cigarette, an edible, a liquid, or vapor, all with a wide variety of concentrations, a specific excise tax is untenable.

Colorado

Read more here 

 

http://taxfoundation.org/article/taxing-marijuana-washington-and-colorado-experience

[t-pain]

not like taxes cant be changed in colorado and washington...