Colorado’s One-Day Cannabis Tax Holiday

Cannabis Tax Holiday

Colorado Will Repeal Cannabis Related Sales Tax on September 16, 2015

Colorado has made news again this week as State Governor John Hickenlooper approved a bill that will cut state taxes on recreational Cannabis by 2%. Perhaps even more interesting news is that the passing of this new legislation brings about a very unique loophole for the people of Colorado. Due to a glitch within the state’s constitution, Colorado will repeal Cannabis related sales tax on September 16, 2015. This ‘Cannabis Holiday’ is due to the wording within the original legalization legislation that called for Cannabis sales tax to be eliminated by 2017. Instead, government officials in Colorado are allowing the tax to expire in order to fulfill their part of the legislation so they can pave the way to establishing a new tax law. Governor Hickenlooper had this to say in regards to the loophole:

‘This fiscal glitch that we have with the constitution … that’s part of the magic of living in Colorado.’ – Gov. John Hickenlooper (D)

The new tax law, going into effect July 2017, will reduce state recreational sales tax from 10% to 8%. The move by the state to reduce tax is a direct response to the ongoing existence of illegal Cannabis distribution. Colorado officials hope that, by reducing the cost difference between legally and illegally sold Cannabis, they can increase regulated business and overall tax profits. Official believe that the 2% loss in yearly tax revenue will be recovered by future legal growth caused by a decrease in the black market.

‘We still have a black market…We want to eliminate that… And one way is to make sure there is not as large a price differential.’ – Gov. John Hickenlooper (D)

This act of recognition and adaptation by the Colorado government is an impactful step in the right direction for both Cannabis legislation and the Cannabis industry. By working to help legal Cannabis businesses as well as legal consumers, the government is acknowledging the potential for monetary gain they see in an industry that could be worth as much as $20 Billion by 2020 (Source: Forbes.com LLC). The reduction in tax gives businesses the option to operate at a lower price point, allowing them to become more competitive with the unregulated black market, with future hopes of eliminating the illegal market altogether. If successful, proper taxation could serve to further legitimize the Cannabis industry as black market operations are either forced to conform to the boundaries of the law or dissipate en masse. This is just another step in the right direction for Colorado, a state already known for being the national trailblazer for Cannabis legislation.

Will building the legal Cannabis industry help to eliminate the Cannabis black market? Is lowering taxes a step in the right direction? Tell us what you think in the comment section below!

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Photo Credit: Dominik Schroeder

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