The Durango City Council has decided to reserve space on the November ballot for the possibility of asking voters to approve a city-imposed tax on recreational marijuana.
During a study session Wednesday, councilors had more questions than opinions about marijuana taxes and asked city staff for more information about imposing either a special sales tax or excise tax. They want to know whether an increase would encourage people to buy from sellers on the black market, whether an increase would influence entrepreneurs’ decisions to open new retail stores and grow operations in the area, how marijuana sales tax collections have increased and other topics.
The councilors didn’t express strong opinions on whether to create an additional city sales tax or back an excise tax on wholesale marijuana.
“I think the issue is clearly undecided,” Mayor Dick White said.
However, the deadlines for placing a question on the ballot are coming up quickly, and any tax increase would likely apply to marijuana sales and not the lodgers tax, which members of council agreed to discuss in the future.
In 2015, the council decided not to place an additional 5 percent city sales tax on recreational marijuana after members of the industry said it would be overly burdensome. The tax revenue would have been used to fund city facilities. Marijuana buyers already pay an additional 15 percent state sales tax, on top of the 3 percent city sales tax and 2 percent county sales tax that applies to all goods bought in Durango. Wholesale marijuana is also subject to a 15 percent state excise tax, and marijuana businesses pay federal income taxes ranging from 60 to 70 percent, said Ashley Yeager, an attorney with The Greenery in Durango.
A recent change in state law renewed discussions about taxing marijuana. This spring, the Legislature allowed Colorado counties, if they choose, to impose up to an additional 5 percent sales tax on marijuana items. So far, La Plata County has not decided if it will. If voters approved a sales tax increase within the county, it could be collected in the city, depending on how the question is framed. If the voters approved a tax that was collected within the city, the city and county would have to agree on how to split the money, City Manager Ron LeBlanc said.
Excise, occupational and special sales taxes have passed in many Colorado towns. Of the 69 towns that have allowed marijuana sales, 49 of them have a special sales, excise or occupational tax, Assistant City Manager Amber Blake said.
LeBlanc suggested that any new marijuana tax revenue be dedicated to construction projects or equipment purchases rather than operational expenses.
Business owners who attended the study session, but did not have an opportunity to comment, said afterward they are concerned about the fairness of an additional tax because their products are already highly taxed, and because the issue is being raised again after it was discussed and rejected by the council in 2015.
“To come back so quickly, it just makes for a constant attack,” said Jonny Radding, co-owner of Durango Organics.
He would like the industry to be recognized for the jobs it has created and the residual contributions of the new businesses.
“I really wish they would applaud what we’ve done for the economy,” Radding said.
The business owners also had concerns that city staff members initially presented incorrect information, saying the state collected a 10 percent sales tax on marijuana, until Yeager corrected them. The state sales tax on recreational marijuana increased to 15 percent on July 1.
“It should be a full and detailed report,” said Joel Cameron, CEO and founder of The Greenery, about the information that should be presented to the council.
At the end of the meeting, Councilors Melissa Youssef and White called for a community conversation about the city’s needs and other revenue streams to fund them. They don’t want to ask voters to approve tax increases one at a time for items such as new city facilities, arts and culture, transit operations and stormwater management.
“I think we need to have a public process; otherwise, we are going piecemeal,” White said.
email@example.comThis story has been updated to correct how much state sales tax is paid on recreational marijuana. Recreational marijuana is exempt from the 2.9 percent sales tax that applies to other goods bought in Colorado.