Colorado Retail Cannabis: How much tax revenue is generated?
Beginning July 1, 2017, retail marijuana and retail marijuana products became exempt from state sales tax (2.9%), and the special sales tax rate on retail marijuana was raised from 10% to 15%, with a 90/10 split between the state and local entities; the state collects 90% of the earned retail marijuana tax revenue, while the remaining 10% of the 15% special tax is remitted back to the local jurisdiction. A 15 percent excise tax continues to be levied on the first transfer of marijuana from a wholesaler to a processor or retailer.
sales tax allocation changes due to legislation enacted July 1, 2017
Broken down further, taxes are allocated as follows:
The 15% retail marijuana excise tax, levied on the first transfer of marijuana from a wholesaler to a processor or retailer, the first $40million is allocated toward Colorado public school construction projects. Any revenue above and beyond the first $40 million, goes into the State of Colorado's Public School Fund.
As discussed above, 10% of the 15% Colorado sales tax revenue is divided among local the jurisdictions from which sales originated. The amount awarded to each jurisdiciton is based on the amount of retail marijuana sales tax revenue earned. Colorado counties themselves are not awarded any retail marijuana sales tax unless there is a retail marijuana store, in an unincorporated area, within that county. Tax revenue is distributed monthly, as shown in the chart below.
The State’s portion of the 15% sales tax (90%) is allocated to the Marijuana Tax Cash Fund (MTCF), created by the State legislature in 2014. State sales tax revenue collected on medical and retail marijuana sales is paid into the fund, in addition to 85 percent of special sales tax revenue. State law requires that the money in the MCTF is spent in the calendar year after it is collected. It is to be allocated toward health care, health education, substance abuse prevention, substance abuse treatment programs, and law enforcement. Please refer to the chart below for more information:
So, exactly how much revenue does CO generate from the sale of retail marijuana?
The following chart reflects total retail marijuana tax revenue earned in the State of CO January 2018-March 2019...
As shown in the chart above, the county of Denver leads the way in terms of revenue collected and remitted to the State of CO. El Paso, Huerfano, San Juan and Sedgewick counties are noticably missing tax data. The reason for this: Per §39-21-113(4), C.R.S., data from counties and local governments identified by the NR (not reported) designation cannot be released. This is in order to protect the confidentiality of the individual taxpaying entities. For example, El Paso county is home to only two retail marijuana dispensaries. El Paso county retail marijuana tax revenue information, if released, would enable analysts to deduce each dispensary's total retail marijuana revenue. For confidentiality purposes, the data collected from counties identified by the NR designation is released in aggregate.
The chart below is an estimate of total recreational marijuana sales by county. This chart is based on the special sales tax rate on retail marijuana of 15%. In 2018, CO's recreational Marijuana industry exceeded $1 Billion. Today, the recreational MJ industry is on track to perform even better this year than it did last year.
The chart above describes total revenue generated by the Marijuana industry in CO. It's quite notable the legislation associated with the retail sales tax increase also worked to exempt retail marijuana and retail marijuana products sold on or after July 1, 2017, from the State Sales Tax rate on tangible personal property, which is 2.9%. We can see this dip in sales tax revenue, reflected by the dotted line above, beginning in July 2017. “Retail Marijuana” and “Retail Marijuana Products” are defined in statute and do not include other types of tangible personal property that a retail marijuana business may offer for sale. These items are still subject to the 2.9% State Sales Tax rate.
These items include:
Rolling papers, etc.
Additionally, SB17-267 removed some special districts' ability to levy sales taxes on retail marijuana sales, however as of July 1, 2017. SB18-088 clarified that the special districts who were authorized by prior voter approval to tax retail marijuana sales before July 1, 2017 may continue to do so.
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