Colorado’s Weed Tax Income Misses the Expected Mark

By Paul Gaita 09/08/14

Despite showing modest gains in the first months of legal weed, Colorado's weed tax revenues have so far been off the mark.

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When Colorado legalized marijuana for recreational purposes in 2012, the move was expected to be a financial and legal windfall for the state. Sales and excise taxes levied on pot were expected by some observers to bring in as much as $98 million in revenue, while also reducing the need for users to frequent the black market.

But in the months that followed the opening of the first retail cannabis stores on January 1, 2014, the Colorado Department of Revenue has collected $25,307,067 in taxes. While the figure is considerable, and modest gains have been posted in certain months, the tax income so far is off the mark from the projected figures.

Several reasons have been cited for the dramatic difference between the expected tax income and the actual amount. The most significant cause is the cost of legal marijuana, which is markedly higher than the price on the black market. Colorado imposed a 15% excise tax on wholesale marijuana and a 10% sales tax on retail sales. As a result, buyers in the Rocky Mountain State were faced with shelling out for pot with a higher price tag than weed bought through less than legal means.

According to the Marijuana Policy Group, just 60% of marijuana users are purchasing through state-approved facilities. Additional tax loss is expected to be incurred by those buyers purchasing pot from medical marijuana patients and then reselling it at higher prices, or by Colorado residents who grow the six plants allowed by the state for personal use.

The cost of legal weed has also spurred buyers to seek out medical marijuana cards, which cost just $15 and grant access to marijuana taxed at 2.9%. Currently, about two percent of the state’s population has a medical card, but the numbers are apparently growing, according to state economists.

Lawmakers are currently examining the tax structure in place for marijuana sales, but as state Representative Dan Pabon noted, “It’s too early to be worried” about whether or not the pot initiative will prove to be as big a payday as those early projections expected.

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Paul Gaita lives in Los Angeles. He has contributed to the Los Angeles Times, Variety, LA Weekly, Amazon.com and The Los Angeles Beat, among many other publications and websites. 

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