Colorado Governor Signs Permanent Cannabis Tax Break And Tax Holiday

Colorado Governor John Hickenlooper approved a bill on Thursday that cuts the tax on recreational cannabis from 10% to 8%. The break will not go into effect until 2017.

Supporters of the legislation argue that the tax break will help to bring down the price of legal marijuana, thereby allowing the state’s legal market to more effectively compete with its black market.

Furthermore, due to the wording of the Taxpayer’s Bill of Rights (TABOR), Colorado will have what is called a tax holiday on September 16th: marijuana sales will be tax-free that day. Although the legalization bill had originally been written so that it would repeal state taxes in 2017, TABOR requires that voters approve any new state taxes based on what the state estimates it will collect and spend from the tax. If either of these is greater than the estimates, citizens are allowed a refund.

Colorado hasn’t made more revenue from marijuana taxes than expected, but total spending is greater than initial estimates because of an uptick in the economy.

Another provision of TABOR is that it requires that the tax rate in question be cut to 0% in such a case. Hence the tax holiday: state lawmakers agreed to cut the rate to 0% for just one day in order to meet the constitutional obligation. The state expects to lose about $100,000 from recreational sales on the holiday.


Photo Credit: 401(K) 2012

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