Reefer Refund: Colorado May Give Back Cannabis Tax Revenue

tax refund

Colorado may have raked in millions of dollars worth of tax revenue from the sale of medical and recreational marijuana, but a strict anti-spending provision in the state’s constitution may force it to hand that money back to the public.

The so-called Taxpayer Bill of Rights was approved back in 1992 and requires the government to give money back to taxpayers when it collects more money than it anticipated. But refunding nearly $60 million in marijuana tax income would divert it away from school construction and other needs that had been depending on marijuana taxes and force the state to pay for them out of its general fund.

In a rare bipartisan effort, legislators are assembling a bill that would seek voters’ permission to hold onto the marijuana tax revenue, despite the Taxpayer Bill of Rights. Some anti-tax groups vowed to fight the effort, even if the refund would only amount to $11 or less per person, due to the state’s strong anti-tax sentiment.

Many marijuana businesses believe that taxes on their products are too high and are helping keep the black market alive. In Colorado, the government taxes the plant at a 15% excise tax based on the average wholesale market rate, a 10% state tax on retail sales, a state sales tax of 2.9%, and local taxes like Denver’s 3.5% tax. The combined rate can significantly eat into margins for many small businesses.

In the end, it’s likely that the state will find a way to keep the excess marijuana taxes, given the strong desire by all sides to do so. Even if the government were forced to pay back the taxes, it’s uncertain how they would do so, since the law is written vaguely, which means the refunds would likely to tied up for some time to come.

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