Colorado is reassessing marijuana cultivation taxes in anticipation of federal legalization

Colorado marijuana regulators are reassessing taxes on wholesale marijuana as the likelihood of federal legalization increases.

Bills proposing federal legalization of marijuana are still a long way from passing Congress, but both Colorado’s marijuana industry and officials believe it’s more a question of when, not about. Federal legalization measures could include excise duties on recreational marijuana production or wholesale transactions as high as 25 percent, but Colorado currently imposes an excise duty of 15 percent on the same. As one of six states that allow retail marijuana to already have an excise tax on wholesale transactions, this could put Colorado growers at a disadvantage, according to marijuana business owners.

House bill 1301, a successful bill from 2021 that loosens the legislation on outdoor cultivation of commercial marijuana, including languages ‚Äč‚Äčthat required Colorado Marijuana Enforcement Division to examine existing rules and tax laws of the recreational marijuana wholesale market in an attempt to be competitive if marijuana is legal under federal law.

“You do not want crops fleeing Colorado to more tax-favorable states,” Paul Julian, a lawyer for the dispensary chain NuVue Pharma, warned a MED committee during a Oct. 18 meeting.

Vertically integrated marijuana companies that produce and sell marijuana can relocate their production elsewhere if wholesale taxes are too high compared to Oregon, California or another state that is newer in the marijuana retail business, Julian added.

In accordance with the requirements of HB 1310, MED set up a committee that will prepare a report with recommendations regarding Colorado’s wholesale marijuana tax rate. The majority of committee members representing the pot industry want to reduce or cut the tax by 15 percent, but that is not a small change for the state. According to Colorado Ministry of TaxationThe 15 percent excise duty on recreational marijuana was responsible for nearly $ 101.5 million by 2020.

If wholesale taxes are cut, the Colorado legislature could replace that revenue with higher sales taxes, according to Bia Campbell, an associate at consulting firm VS Strategies, a branch of marijuana law firm Vicente Sederberg.

“We do not want to put the state in a position where they are not going to receive this [funding]said Campbell during the October 18 meeting. “For me, the answer to that is through sales taxes. If we get rid of the wholesale taxes and we move the revenue into the sales taxes, we will solve a lot of the problems that other people on this call have already raised. And that would be a change that the Colorado legislature could make in 2023. ”

Interstate trade may also be on the horizon if federal legalization takes place, and having competitive tax and production rules in place will further protect Colorado marijuana companies, according to Marijuana Industry Group CEO Truman Bradley. Production limits and a restructuring of state rules would be a way to further protect Colorado growers, he said.

“Companies and industries are leaving [for federal legalization], and we like to think we’re a big industry, but we are not. We need to talk about a really deliberate rollout when it comes to intergovernmental trade, “Bradley said during the MED meeting.” Some people think ‘federal legalization? Boom. Then the game starts. ‘ But I’m worried about what it does to our cultivators in the state. It is clear that there will be a federal tax. ”

In 2019, the Oregon legislature passed a law authorizing the state governor to enter into agreements with other states on intergovernmental trade in marijuana. Ean Seeb, Governor Jared Polis’ marijuana policy adviser, told the MED Committee that there have been talks on an intergovernmental marijuana trade law in Colorado, and such could come in future legislative meetings.

Although Colorado has a strong lead in marijuana production and retail compared to most of the country, national legalization and intergovernmental trade could ultimately hurt Colorado’s status as a big fish, argued Shannon Fender, director of public affairs for dispensary chain Native Roots.

“I do not think it is a matter of course that intergovernmental trade makes Colorado more competitive,” she said, “and I think that is something this working group needs to look into.”


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