Colo. medical marijuana dispensaries will have to start paying sales tax following AG’s ruling

Colo. medical pot suppliers will have to pay taxes

DENVER — Colorado is gearing up to officially tax and regulate medical marijuana dispensaries, a move lawmakers say amounts to legal recognition of a growing industry.

The state Attorney General John Suthers concluded in an opinion issued Monday that medical marijuana is considered personal property that can be taxed and shouldn’t be treated like prescription drugs, which are tax exempt.

The move would make Colorado the latest provincial government to tax marijuana for medical use, after voters in California adopted a similar program when the use was legalized in 1996. Cities such as Denver and Oakland, Calif., also plan to levy municipal taxes on local cannabis dispensaries.

Colorado Sen. Chris Romer, D-Denver, said he plans to introduce legislation in January that would require dispensaries to buy licenses, as well as pay the state’s 2.9 percent sales tax. He estimates the state could collect up to $15 million a year on the sales, and communities could collect an additional $45 million a year through city and county taxes.

Revenue department spokesman Mark Couch said the state has no official estimate but added that California collected $11.4 million on sales of $142 million in 2006. A bill to tax and regulate all marijuana use in California like alcohol would generate nearly $1.4 billion in revenue, according to an analysis released in July by tax officials.

Couch said the revenue agency recently surveyed about 60 dispensaries and found half of them already had sales tax licenses and were paying taxes because they sold other products, but that not all of those were paying taxes on marijuana sales. With the backing of Suthers’ opinion, he said the department will begin collecting taxes on all medical marijuana sales immediately.

“This is not a new tax, it’s just an existing tax being applied to a new product,” Couch said.

Denver plans to notify dispensaries that it will start collecting municipal sales tax starting in December.

Romer said licensing and collecting taxes are signs that the industry is going mainstream and it’s time for regulation. Colorado voters approved medical marijuana in 2000 but rejected a measure to legalize recreational marijuana in 2006.

“This will make medical marijuana a mainstream business. Not recreational marijuana, medical marijuana,” he said.

Marijuana support groups welcomed Colorado’s decision limited to medical marijuana and called it a validation of their legal rights.

Sean McAllister, chairman of the board of Sensible Colorado, a group that promotes medical marijuana use, said dispensaries were expecting Suthers’ opinion.

“This is not a black-market industry, it’s a legitimate industry so it should be taxed like everything else,” he said.

The group’s executive director, Brian Vicente, estimated that 90 percent of the state’s dispensaries are already paying state and local taxes though most have not registered as dispensaries.

Many dispensaries, which aren’t regulated by the state now, have registered as wellness centers and alternative health clinics, he said.

Vicente said the state could bring in another $12 million by charging for annual licenses and imposing other fees similar to those charged on tobacco sales.

While other industries may look for breaks, Vicente said paying taxes helps give dispensary owners more legitimacy and protection from possible raids.

“I think the state has less incentive to shut these wellness centers down when they receive so much tax revenue from their existence,” Vicente said.

Bruce Mirken, spokesman for a marijuana advocacy group, the Marijuana Policy Project in Washington, said it’s better for government to have control of the process and regulate marijuana use than to have a rogue industry taking advantage of new laws, inviting crackdowns by law enforcement.

“This shows that medical sales are in fact possible,” he said.

State Sen. Greg Brophy, R-Wray, said taxing marijuana dispensaries amounts to defacto legislation of marijuana use for recreational users, as well as medical users.

He said the industry needs further regulation to ensure patients get the drugs they need and aren’t abusing them, but lawmakers also need to honor the voters’ wishes.

“It’s going to be hard to do, but we have to get it right,” Brophy said.

Associated Press writers Colleen Slevin, Ivan Moreno and Kristen Wyatt also contributed to this report.