Over the past few years, several states have begun legalizing marijuana. Normally, the citizens of these states vote on a ballot measure, notably to add the legalization of marijuana as a state constitutional amendment.
For instance, Colorado has legalized recreational and medical marijuana. Based on this legalization, Colorado has various sales taxes and excise taxes imposed upon marijuana. For instance, one type of tax is a retail marijuana sales tax at a rate of 10%. Comparing Colorado’s tax revenues remitted in June 2016 to June 2017, Colorado has seen a 46% increase in the amount of taxes remitted! This represents a total collection of $8.7 million for June 2017 alone. The retail sales tax year-to-date fiscal year 2016-2017 analysis shows a 46.7% increase compared to year-to-date fiscal year 2015-2016. This means tax revenues are up to almost $100 million! Clearly, Colorado is making the most of the legalization.
Another state that has legalized marijuana is California. In California, the state tax rate on marijuana is 15%. Based on projections by California, it is expected to bring in $1 billion in taxes per year.
Of course, these are just two of the states that have legalized marijuana. The real question becomes whether these taxes can remain consistent to fill budget shortfalls. States are relying upon these taxes in order to balance budgets and make up for reduced federal spending. If the black market decides to attempt to undercut the legal market, then this could pose a serious problem for these states in reducing the state revenues. Do not be surprised if states take one or both of the following actions: raise taxes on marijuana and/or crack down hard on those engaging in black market sales.
About the Author: Gerald “Jerry” Donnini II is a partner of the Law Offices of Moffa, Sutton, & Donnini, P.A. Mr. Donnini concentrates in the area of Florida and Federal tax matters, with a heavy emphasis on the tobacco, convenience store and petroleum industries. He also handles a myriad of multi-state state and local tax issues. Mr. Donnini is a co-author for CCH’s Expert Treatise Library: State Sales and Use Tax and writes extensively on multi-state tax issues for SalesTaxSupport.com.
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In his law practice Mr. Donnini's primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini obtained his LL.M. in Taxation at NYU. Mr. Donnini is licensed to practice law in Florida. If you have any questions please do not hesitate to contact him via email [email protected] or phone at 954-639-4496.