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On May 28, 2013, Colorado Governor John Hickenlooper signed a series of bills regulating the manufacture, sale, distribution, and use of recreational marijuana, including a bill to tax marijuana sales by 25 percent (Tax Bill). However, the Tax Bill will need to be approved by Colorado voters in November in order to become effective.


Governor Hickenlooper, state lawmakers, public interest groups, and marijuana advocates have stated it is critical that Colorado voters approve this Tax Bill. If this Tax Bill is not approved by Colorado voters, the state will be required to use general fund money to pay the costs necessary to enforce the new marijuana laws, which would divert money away from education and other state priorities.


If the Tax Bill is passed by Colorado voters, then beginning January 1, 2014, the Tax Bill would impose a 10 percent sales tax on the sale of retail marijuana products sold to consumers by a retail marijuana store, and an excise tax on the first sale or transfer of unprocessed retail marijuana by a retail marijuana cultivation facility, at a rate of 15 percent of the average market rate of unprocessed retail marijuana.


The first $40 million of revenues collected from the excise tax on the unprocessed retail marijuana product sales will be used for the state’s construction of schools, and the remainder of the revenues collected from the excise tax and the sales tax will be used to enforce the regulations on the retail marijuana industry.


Lawmakers hope they struck a balance with the tax rates set forth in the Tax Bill so the revenues generated from such taxes will be sufficient to provide funding for the enforcement of the regulations on the retail marijuana industry, while not being so onerous that consumers would choose to buy cheaper, untaxed marijuana products on the black market.


Click here for additional information about this Tax Bill discussed in the Multi-State Tax Update on May 23, 2013.

Click here for the full text of the Tax Bill (H.B. 1318).