Marijuana

Colorado Task Force Favors Heavy Pot Taxes and Opposes Cannabis Cafés

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Jacob Sullum

The Amendment 64 Implementation Task Force met for the last time Thursday night, approving its final round of recommendations to the Colorado General Assembly about how best to regulate the recreational marijuana market that is supposed to start operating next year. In a word, strictly.

The Denver Post reports that the task force wants marijuana to be heavily taxed. Amendment 64 calls for an excise tax collected at the wholesale level "not to exceed 15 percent prior to January 1, 2017, and at a rate to be determined by the General Assembly thereafter." The task force says the initial rate should be the full 15 percent and recommends a special tax at the retail level on top of that, in addition to the standard state and local sales taxes. "Though the task force did not endorse a specific amount for the sales tax," the Post says, "it gave a 25 percent rate as an example." Both taxes would have to be approved by voters.

Since the task force also has recommended retaining a rule that requires marijuana sellers (who currently supply patients under Colorado's medical marijuana law) to grow 70 percent of the cannabis they sell, the distinction between wholesale and retail is pretty fuzzy. Amendment 64 says the excise tax should be "levied upon marijuana sold or otherwise transferred by a marijuana cultivation facility to a marijuana product manufacturing facility or to a retail marijuana store." But if the cultivation facility and the store are both part of one operation, as required by the 70-percent rule, the same entity will act as both wholesaler and retailer, collecting the excise tax from itself and then turning around to collect the sales taxes from customers. Depending on what the markups are at those two stages, the combination of a 15 percent excise tax and a 25 percent sales tax could raise the retail price, which is around $25 for an eighth of an ounce in dispensaries, by 50 percent or more. Since black-market prices are about twice as high as dispensary prices, that might be getting into dangerous territory.

The task force is also recommending that the state legislature ban pot smoking in marijuana stores, bars, restaurants, and even social clubs, which would seem to rule out Amsterdam-style cannabis cafés. On the brighter side, it previously recommended that visitors from other states be allowed to purchase marijuana.

The Post does not say how the task force came down on issues such as advertising, labeling, child-resistant packaging, limits on THC content, or what it means to consume marijuana "openly and publicly," which remains illegal under Amendment 64. I will follow up with more details when I have them.

Addendum: This post has been corrected in light of new information. See this update.