One of the more controversial topics in America right now is the legalization and use of recreational marijuana. Currently two states (Colorado and Washington) have legalized its use for individuals who are 21 years or older. Colorado collected slightly more than $2 million in taxes on the sale of recreational marijuana in the month of January (Ingold, 2014). Extrapolating from those figures, recreational marijuana businesses did slightly more than $14 million in retail sales during the month (Ingold, 2014). In this piece, Colorado will be used as the model for the current state of recreational marijuana, additional tax revenues that are being generated (statewide), savings that could be realized by the government, and what impacts it may have if it were legalized on a federal level.
According to The Denver Post, a 15% excise tax is charged on every marijuana sale, along with a 10 % sales tax. That equals 25% tax in total for the sale of marijuana, and for the state of Colorado, that will bring in a lot of revenue that the state can use. (Battle and Pinkston, 2013)
As noted above, the state of Colorado was able to generate over $2 million in taxes in its first month of operations. In total, 59 recreational marijuana businesses filed returns in January (Ingold, 2014) and many more will do the same in the coming months. What might this tax figure look like at the end of the year? State budget officials are projecting sales of $613 million over the next year – more than 50 percent higher than previous projections. That’s on top of an estimated $345 million in medical dispensary sales (Raabe, 2014). With sales projections from the state already increased, for estimations sake let’s call it a billion dollar industry after a year, for the state of Colorado. If projections are on point, that could lead to $153.25 million in additional tax revenues that the state was missing out on the year before, just by legalizing recreational marijuana. However, these numbers only tell part of the story, next we’ll examine the allocation of these additional tax revenues and other fees collected throughout the application process.
With only 59 businesses filling tax returns, one might assume the number would have been higher – so why isn’t it? When applying through the state for a recreational marijuana dispensary, the following fees are due with the submission of the application:
State Application ($250), Local Authority Application ($250), Medical Marijuana Type 1/2/3 Center ($3,750-$14,000), Infused Product Manufacturer ($2,750), State testing application ($2,500), Local Authority Testing Application ($2,500), individual owner application ($1,000), a business license ($2,750) and an optional premises cultivation ($2,750). (colorado.gov, 2014)
If you filed for a medical marijuana type 1 center and didn’t apply for the optional premises cultivation fee, you’d be looking at a starting bill of $15,750. That figure is just for the paperwork, not including...