Tax And Regulate Like Alcohol? Not In CO and WA

With the taxation of marijuana in Colorado on tomorrows ballot, some have high hopes for the revenue that their localities should soon see. Others see the taxation proposition as well as the tax structure in Washington state as burdensome. I tend to agree, as over-taxing marijuana for recreational users most likely will lead to strengthening the black-market, undoing a major intent of the laws. The proposed tax rates would be just fine if and only if both Colorado and Washington can get the market price for cannabis way down, but then all their dreams of pet projects being financed off the backs of weed-smokers would depend on a high volume of sales.

In Northglenn, there’s been discussion of marijuana taxes paying for a senior exercise center or traffic-safety improvements around schools.

In Denver, officials expect pot tax money to fund regulation of marijuana stores or educational campaigns. And in Glendale, the talk has been that there isn’t anything to talk about yet.

“It’s too ambiguous at this point for anyone to depend on,” said Chuck Line, Glendale’s deputy city manager.

Proposition AA would impose a 15 percent excise tax on wholesale transfers of recreational marijuana and another 10 percent statewide sales tax at the retail level. The excise tax money would go toward school construction, as specified in the constitutional amendment passed last year that legalized recreational marijuana sales.

Local governments that allow pot sales will get a 15 percent cut of the statewide sales tax money.

Some cities, like Denver, also have their own recreational marijuana sales tax measures on the ballot this year.

According to the state’s voter guide, Proposition AA’s sales tax is expected to generate close to $40 million a year, of which about $6 million would be shared with local governments.

“I’m not sensing it’s a whole lot of money,” said Edgewater City Manager HJ Stalf.

Northglenn City Manager John Pick told council members they’ll have to wait to know if the tax money windfall can sustain their brainstorms.

“At this point, we don’t know how much we’ll bring in,” he said at an Oct. 7 study session. “Maybe a lot. Maybe a little.”


Colorado Marijuana: If the ballot measure passes Nov. 5, marijuana buyers in Colorado will pay at least 10% in taxes — a 10% special sales tax that will also help fund marijuana enforcement plus the 2.9% sales tax (the same tax added to retail sales). Included in the ballot measure is a 15% excise tax on marijuana producers to raise revenue for school construction.

The Colorado Legislative Council estimates the tax on buyers and producers could bring in $33.5 million in its first year and as much as $67 million in the following year. Colorado started accepting permit applications for marijuana retail locations on Oct. 1.

Colorado Alcohol: Taxes on alcohol are by volume, not by price. The beer tax is 8 cents per gallon, the wine is 28 cents per gallon and the liquor tax is $2.28 per gallon.

Colorado Tobacco: 84 cents state tax per pack of cigarettes. For other tobacco products, the tax is 40%. A pack of cigarettes costing $5 will actually cost $7.00, including 2.9% sales tax plus the state cigarette tax and a $1.01 per pack federal tax.

Colorado Gambling: Although the state constitution authorizes collection of up to 40% of profits on gambling, the highest rate to date on casinos has been 20%, and varies casino to casino depending on the amount of profits. Colorado has about 40 casinos and last year collected more than $100 million in gaming taxes.


Washington Marijuana: For consumers, the effective tax rate is 44%, according to the Washington Liquor Control Board. The sticker price includes a 25% tax on producers and a 25% tax on processors plus 25% added to the price of the product. Buyers also pay an additional 6.5% state sales tax.

The revenue could bring in as much as $1.9 billion in the first five years to go toward a variety of services, including social and health programs, a marijuana use hotline and the Alcohol and Drug Abuse Institute at the University of Washington. The state’s Liquor Control Board will begin issuing permits for marijuana retail locations starting Nov. 18. Under the law, the state can have a maximum of 334 retail locations.

Washington Alcohol: Beer and wine do not have a tax on top of the 6.5% state sales tax. However, liquor has a 20.5% sales tax rate, plus a tax of $3.77 per liter. That means a $20 1-liter bottle of liquor is actually going to cost $27.87.

Washington Tobacco: $3.02 state tax per pack of cigarettes. A $5 pack of cigarettes will actually cost $9.35, including the 6.5% sales tax, plus the state and federal cigarette tax.

Washington Gambling: There is no state tax on casinos, but cities and counties can collect as much as 20% on casino profits, depending on the activity. All profits from card room games are taxed at 20%, punch board and pull-tabs at 10% and bingo at 5%. Cities and countries generated more than $30 million from gambling last year, according to the Washington State Gambling Commission.

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