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Recreational marijuana, a potential tax cash cow for Colorado

March 22, 2013

Marijuana smokers in Colorado were jubilant last year when voters passed Amendment 64 to legalize recreational use of the drug.

But they aren't so happy now.

Marijuana-plants-weed-pot

Colorado lawmakers are working out how to regulate legal marijuana and it looks like taxes on the wacky weed will be a big part of the process.

Recommendations approved this month by the Amendment 64 Implementation Task Force
and sent to the Colorado General Assembly for further action could take more of bite out of the pocketbooks of pot smokers than their purchases of munchies.

The task force suggests that when the recreational marijuana market begins operating next year, the plant should be taxed heavily. In fact, the recommended taxes could push retail prices close to the black-market level,
which would undermine the central aim of Amendment 64 to create a
legal market in which marijuana is treated like alcohol.

The proposed taxes include a 15 percent state excise tax imposed at the
wholesale level and a special state sales tax, perhaps as high as 25
percent, imposed at the retail level. Marijuana sales also would be subject to state
and local sales taxes.


But the tax issues aren't yet settled. The task force recommended that Colorado
lawmakers send the excise and added sales tax proposals to the voters.

Supporters of the taxes say the money is needed to regulate
marijuana stores.

Among the tax advocates is Colorado Department of Revenue
Executive Director Barbara Brohl, who told the Denver Post that a lack of money has hindered her office's regulation of the state's medical-marijuana
businesses.

Opponents of the taxes say that the added costs will essentially push the price of recreational marijuana to what purchasers paid for illegal amounts of the drug.

If the tax proposals do show up on Colorado ballots, looks for aggressive campaigning from both sides.

Federal drug enforcement hurdle: Of course, Colorado still faces the problem that Uncle Sam considers owning any amount of marijuana anywhere in the United States and for whatever purposes a federal crime.

A U.S. Representative from the Centennial State is trying to take care of that.

Rep. Jared Polis, Democrat from Colorado's 2nd congressional district, has introduced H.R. 499, the Ending Federal Marijuana Prohibition Act of 2013.

HR 499 to decriminalize marijuana at the federal level

It would decriminalize marijuana at the federal level and leave it to the states to regulate marijuana in much the same way that they now regulate alcohol within their borders.
 
Polis' bill is pending in five House committees, including the tax-writing Ways and Means. So far it has 13 cosponsors: Reps. Earl Blumenauer, Earl (D-Ore.), Steve Cohen (DX-Tenn.), Michael M. Honda (D-Calif.), Jared Huffman (D-Calif.), Barbara Lee (D-Calif.), James P. Moran (D-Va.), Jerrold Nadler (D-N.Y.), Eleanor Holmes Norton, (D-D.C.), Chellie Pingree (D-Maine), Mark Pocan (D-Wisc.), Dana Rohrabacher (R-Calif.), Janice D. Schakowsky (D-Ill.) and Eric Swalwell (D-Calif.).

Good for Polis for trying to help his state, but right now Govtrack.us gives H.R. 499 just a 2 percent chance of getting past committee and a 1 percent chance of being enacted.

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TAX-SAVVY WAYS 
TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

Comments
  • Greetings! Very useful advice! It’s the little changes which will make the greatest changes. Thanks a lot for sharing!

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