CO: Appeals Court – Pot Sales Tax Is Illegal


A Colorado Court of Appeals ruling on retail marijuana sales taxation by Adams County could put at least $1.8 million in Pueblo County sales tax revenue in jeopardy.

The appeals court reversed a district court ruling on Thursday that said Adams County could impose a tax of 3 percent on retail marijuana sales in that county. Three home-rule cities in Adams filed suit, arguing that the tax was unconstitutional, and the appeals court ruled that county sales taxes for a single product can only be imposed by the Legislature or constitutionally.

The court agreed with the cities that sued: Northglenn, Aurora and Commerce City. Lawyers for the cities said in addition to being unconstitutional, the tax hampers the competitiveness of the marijuana outlets in those cities in relation to the many stores in the Northern Colorado area and Denver County. Adams is located on Denver City-Countys northeast border.

We hold that Adams County does not have either constitutional or statutory authorization to impose a special sales tax on retail marijuana, the court ruling filed Thursday said.

Adams and Pueblo counties are the only counties in the state with a marijuana sales tax. Pueblos tax, in effect since 2014, the first year of legal dispensaries in the state after the 2012 passage of Amendment 64, is 3.5 percent.

According to information given to The Pueblo Chieftain on Friday by the countys finance office, $1,831,715 had been collected from 2014 through November. Adams County has collected $1.3 million since July 2015 through November, Jim Siedlecki, that countys communications chief, told The Chieftain on Friday.

Pueblo County released a statement Friday about its position on the matter.

(Legal) counsel is reviewing the judgment from the court of appeals and is closely following Adams Countys response. Counsel will discuss it with the commissioners when the time is appropriate, said the release sent by Paris Carmichael, the countys community information manager.

Adams County contended that since voters approved the tax in 2014, that it was legal. But the three cities sued and now are embroiled in the court case against its county. Siedlecki said that every area of Adams County, including the three cities, voted for the tax.

The appeals court, in a 3-0 ruling, cited that only the Legislature and a constitutional amendment can set county taxes for a single item, no matter what voters say.

Siedlecki said that Adams will continue to collect the tax. No one told us to stop, he said.

The county commission there will not meet again this year, he said. So most decisions have yet to be made.

We were disappointed by the ruling and are re-evaluating our options. We may establish a place where to keep the (collected) taxes, he said. We could appeal to the state Supreme Court.

Siedlecki said that the county has granted $517,000 in four-year scholarships to low-income students, a sum matched by the Colorado Higher Education Opportunity Fund. We will honor the scholarships we have granted regardless of the outcome of the case.

Pueblo City Manager Sam Azad said the city has been watching the case, but it has no impact on the citys own marijuana taxation, since Pueblo, like the three Adams cities, is a home-rule city. In November, Pueblo city voters narrowly OKd establishment of retail marijuana shops in the city but rejected a 4.3 percent sales tax on the retail sale of marijuana.

In Pueblo, voters OKd a graduated excise tax on marijuana sales and movement from cultivation site to retail sales stores and infusion sites. This year, the excise tax is set at 1 percent. On Jan. 1, it will rise to 2 percent. In subsequent years through 2020, it will rise 1 percent each year, bringing it to 5 percent.

That tax is not part of the suit, nor is it illegal to implement it, Carmichael said. She said there is a clear explanation of the tax rates and where each fund is designated on the countys website,

The 3.5 percent sales tax goes into a marijuana cash fund, Carmichael said, along with fees collected for business applications and renewals, penalties assessed for violations and the return the state gives the county from its state tax.

She said Pueblos 1A list of projects will not be affected by the appeals courts action.

In November 2013, Pueblo County voters, by a 61-39 percent margin, approved the 3.5 percent sales tax.

But the appeals court ruled that voter decisions are not valid concerning county sales taxation for a single product, again it being a legislative or constitutional decision.

Jim Parco, who led Growing Pueblos Future during the recent election decision to retain county recreational marijuana, said he knows of no retail owner who has a problem with the sales tax here.

(Owners) know the tax provides an enormous financial benefit to the county, and I have heard no complaints, he said Friday. Were only three years into a new industry, and its to be expected there will be regulatory changes.

Pueblo, he said, is in a different position than the Adams County stores because the nearest recreational stores are in Manitou Springs to the north and Trinidad to the south.

He said that since the greatest number of marijuana businesses in Pueblo are not retail sales stores, most are affected by the excise tax and not the sales tax.

All we know about the industry, he said, is were 100 percent positive that we dont have it 100 percent right.

It might take a state Supreme Court ruling to get it right on sales taxation of marijuana.

News Moderator: Katelyn Baker
Full Article: Appeals Court – Pot Sales Tax Is Illegal
Author: Peter Strescino
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Website: The Pueblo Chieftain