There is an ambiguous provision in the Colorado state constitution’s Taxpayer’s Bill of Rights that is forcing a one-day tax holiday on buying pot. This weird conflict in our state constitution is the same law that triggered a refund in the first year of pot sales.
The Colorado constitution requires voters to approve new taxes based on estimates of the sales. If the tax collected is more than what was estimated, a refund is necessary. This is what happened in the first year of pot sales.
On September 16th, stores for recreational pot will not be charging the normal 10% special tax placed on buying pot. The regular sales taxes and local taxes will be charged as usual. This is a one-day only, never-to-happen again tax break. Lawmakers decided to cease the sales tax for the one day to meet constitutional commitments.
On the ballot for 2015, voters will be asked to waive a refund due to a low estimate of Colorado’s economic activity on the 2013 voter’s guide. If voters reject the measure, approximately $33 million will be refunded to pot growers and users through tax breaks on production and sales, and $25 million will go to Colorado taxpayers through a sale tax refund. A bill that Governor John Hickenlooper signed into law last week includes a ballot action in November and a permanent tax cut from 10% to 8% on recreational pot sales that will begin in July 2017.
The state expects to lose $100,000 in revenue by the one-day tax holiday. Worse, the state will lose close to $3.6 million in the 15% excise tax on pot sales from the cultivators to the retailers on September 16th. The September date was chosen because the end-of-the-year fiscal report is certified on September 15th.
If you have a tax issue and need legal assistance, contact our Denver tax attorney at 303-618-2122. Our Denver tax lawyers focus on the tax implications of a business structure, including marijuana businesses, tax planning, back taxes, estate tax issues, the release of tax liens and levies, and more. For more information, visit our tax law attorney website. For more information on our other areas of practice, visit www.gantenbeinlaw.com.