Industry experts and city officials on Monday laid out new ways Denver could tax marijuana customers and companies as part of the ongoing search for rates that are high enough to bring in major money but low enough not to push people into the black market.
Possible options included raising the taxes on medical marijuana to match what recreational users are paying, creating a new tax for wholesalers or setting a new flat amount companies would have to pay to operate a marijuana business.
Denver City Council members haven’t decided yet to make any official changes to how the marijuana industry is taxed. But questions around what to charge cannabis companies and consumers as well as where and how to spend their money continue to come up, Denver Councilwoman Kendra Black said Wednesday.
“For the two years that I’ve been a City Council person, every time we talk about marijuana, taxes and taxation come up,” Black said at Monday’s meeting. “We talk about the possibility of raising the taxes, and we talk about earmarking the taxes.”
Black chairs the city’s committee on marijuana issues, where all 13 city council members can get data about the marijuana industry and float regulatory changes like allowing pot shops to stay open later. She was joined Monday by councilmen Kevin Flynn, Paul Kashmann and Wayne New.
In Denver, all medical marijuana and medical marijuana products sold are subject to the city’s general sales tax rate of 3.65 percent. Recreational marijuana and products are subject to that general tax as well as a special sales tax rate of 3.5 percent.
Basically, if a consumer was dropping $20 on weed, they’d have to give Denver 73 cents if the marijuana purchased at a medical pot shop and $1.43 if they bought it at a retail store.
In 2015, Denver collected $15.7 million from sales taxes on recreational marijuana and another $7 million from taxes on medical marijuana, according to city data.
The state of Colorado charges its own taxes on cannabis sales.
Altogether, what Denver is charging companies and consumers in taxes is roughly on par with the tax rates in other major metros like Los Angeles, Seattle and Las Vegas, said Adam Orens, a consultant with the Marijuana Policy Group.
The tax rates are also roughly the same for communities in the Denver metro, Orens told the committee. “There’s nothing right now to give somebody the incentive to drive across the metro area to make a purchase solely based on tax rates.”
City economist Jeff Romine said while he and Orens could provide data and information about the industry and the effects possible changes could have on the market, they were not necessarily recommending any changes or suggesting there was some perfect level out there.
“What you choose will have an impact on how this market looks and how these facilities look,” Orens said.
Earmarking the money
“Last year, when we were having our affordable housing discussions,” Black said, “I actually suggested earmarking marijuana money for affordable housing. That idea didn’t go anywhere.”
Denver auditor Tim O’Brien did not weigh in how marijuana should be spent, but he recommended modifying how the tax revenue is handled by the city.
“Having a special revenue fund where you segregate those revenues and the expenditures, whatever they’re for, is a more transparent, accountable way to deal with those kinds of dollars,” O’Brien said. “Right now I would suggest … that the general fund is profiting from the marijuana business.”
Revenue in Denver’s general fund can be spent on anything from administrative uses to public safety.
“From the very beginning, it was just put it in the general fund just like all other sales and uses taxes go in the general fund,” said David Broadwell, assistant city attorney. “You have to kind of project back t0 ’09, ’10, ’11. We were desperate for general fund revenue just to pay for normal city services.”
In an effort to be more transparent about how money from taxes on marijuana is being spent, the city highlights in the 2017 budget the 12 city agencies that receive the money for education, to prevent marijuana related crimes and so on, said Brendan Hanlon, chief financial officer for the city.
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