June 15, 2019

HB 13-1318: Creating Excise and Sales Taxes to be Levied on Retail Marijuana

On April 18, 2013, Rep. Jonathan Singer introduced HB 13-1318 – Concerning the Recommendations Made in the Public Process for the Purpose of Implementing Certain State Taxes on Retail Marijuana Legalized by Section 16 of Article XVIII of the Colorado Constitution. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Subject to voter approval at the statewide election in November 2013, the bill imposes a sales tax and an excise tax on the sale of retail marijuana, which was legalized by section 16 of article XVIII of the state constitution.

Sales tax: Beginning Jan. 1, 2014, the bill imposes a tax of 15 percent on the sale of retail marijuana or retail marijuana products to a consumer by a retail marijuana store. The tax imposed is in addition to the 2.9 percent state sales tax and any local government sales tax that is imposed on the sale of all property and services pursuant to current law.

On or after Jan. 1, 2014, the general assembly is authorized to establish a rate that is lower than 15 percent by a bill enacted by the general assembly and signed into law by the governor. After establishing a tax rate that is lower that 15 percent the general assembly may increase the rate by bill enacted by the general assembly and signed into law by the governor, so long as the rate does not exceed 15 percent. An increase in the rate does not require additional voter approval.

A retail marijuana store is required to add the tax imposed as a separate and distinct item, and when added, the tax constitutes a part of the total price of the retail marijuana or retail marijuana products purchased. A retail marijuana store is required to collect and remit the tax to the department in the same manner as the state sales tax is collected and remitted to the department pursuant to current law.

Of the revenues collected pursuant to the 15 percent sales tax, 10 percent will be distributed to each local government in the state that has one or more retail marijuana stores within its boundaries. Each local government’s share of the revenues collected shall be apportioned according to the percentage of retail marijuana and retail marijuana products sales tax revenues collected by the department in the local government as compared to the total retail marijuana and retail marijuana products sales tax collections that may be allocated to all local governments in the state. The remaining revenues shall be deposited in the marijuana cash fund and appropriated as directed by the general assembly.

Excise tax: Beginning Jan. 1, 2014, the bill imposes a tax on the sale or transfer of unprocessed retail marijuana by a retail marijuana cultivation facility to a retail marijuana store, retail marijuana product manufacturing facility, or another retail marijuana cultivation facility. The amount of the tax is 15% of the average market rate of unprocessed retail marijuana statewide on the date that it is sold or transferred, as determined by the department, and the tax is imposed when a retail marijuana cultivation facility sells or transfers unprocessed retail marijuana to a retail marijuana store, a retail marijuana product manufacturing facility or another retail marijuana cultivation facility.

On or after Jan. 1, 2014, the general assembly is authorized to establish a rate that is lower than 15 percent of the average market rate by a bill enacted by the general assembly and signed into law by the governor. After establishing a tax rate that is lower that 15 percent the general assembly may increase the rate by bill enacted by the general assembly and signed into law by the governor, so long as the rate does not exceed 15 percent. An increase in the rate does not require additional voter approval.

The bill specifies that every retail marijuana cultivation facility is required to keep certain records regarding the sale or transfer of unprocessed retail marijuana and is required to collect and remit the tax to the department.

As required by section 16 of article XVIII of the state constitution, the bill specifies that the first $40 million received and collected in payment of the excise tax on unprocessed retail marijuana shall be transferred to the public school capital construction assistance fund currently created in law. Any amount remaining after the transfer shall be transferred to the marijuana cash fund.

Revenue and spending limitations: The bill allows the state to collect and spend any revenues generated by the retail marijuana sales tax and retail marijuana excise tax as voter approved revenue changes.

Submission of ballot questions by the secretary of state: The bill requires the secretary of state to submit a ballot question at the statewide election to be held in November 2013 asking the voters to:

  • Allow the general assembly to impose a retail marijuana sales tax at a rate not to exceed 15 percent of the sale of retail marijuana and retail marijuana products;
  • Allow the general assembly to impose a retail excise tax at a rate not to exceed 15 percent of the average market rate of unprocessed retail marijuana on unprocessed retail marijuana at the time when a retail marijuana cultivation facility sells or transfers retail marijuana to a retail marijuana product manufacturing facility, a retail marijuana store, or another retail marijuana cultivation facility;
  • Allow the general assembly to decrease or increase the rate of either tax without further voter approval so long as the rate does not exceed 15 percent for either tax; and
  • Allow any additional tax revenue to be collected and spent notwithstanding any limitations in TABOR or any other law.

Marijuana cash fund: The bill changes the name of the existing medical marijuana license cash fund to the marijuana cash fund.

The bill specifies that the sale of marijuana or marijuana products by a medical marijuana center to a consumer and the sale or transfer of unprocessed marijuana by a marijuana cultivation facility to a medical marijuana center are not subject to either tax. The department of revenue (department) is required to promulgate rules for the implementation of both taxes.

On April 25 the Finance Committee amended the bill and sent it to the Appropriations Committee. On April 26, the Appropriations Committee amended the bill and sent it to the floor of the House for consideration on 2nd Reading.

Since this summary, the bill was amended in the House on Second Reading but passed, and also passed Third Reading in the House. It has been introduced in the Senate and assigned to the Finance Committee.

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