Colorado will waive sales taxes on marijuana for a day, thanks to a quirk in its state constitution.
On Sept. 16, the typical 10% sales tax and 15% excise tax on recreational cannabis won’t be collected. The sales-tax break is projected to save customers $20 on a mid-grade ounce of pot in the Denver area, where ounces have been priced around $200 this summer before tax.
Included in Colorado’s constitution is a “Taxpayer’s Bill of Rights (TABOR),” which requires voter approval on all new taxes. In 2013, voters approved of a 25% tax on marijuana, a year after marijuana was legalized statewide.
The bill of rights also calls for new taxes to be refunded or waived if tax collections exceed projections.
In 2014, marijuana taxes raised $58 million, short of the projected $70 million; however, because overall tax collection that year exceeded projections, Colorado must ask its voters for permission to keep the money.
In addition, a clause in the TABOR requires the pot tax rate to revert to zero, and to comply with the constitutional obligations, state lawmakers agreed to eliminate sales tax for a day.
Financial analysts estimate the tax exemption will potentially cost the state between $3 million and $4 million in marijuana sales tax revenue, according to the Associated Press.
However, marijuana won’t be entirely tax free, as a regular 2.9% sales tax will still apply, along with medical marijuana taxes and local pot taxes.
In 2017, a permanent sales-tax break on recreational marijuana will take effect, lowering the rate from 10% to 8%, reports the Denver Post.