Colorado Marijuana Business

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What is the Demand for Marijuana in Colorado?

More Colorado residents are moving away from the unregulated marijuana market to a controlled market within the state. In 2014, the first three months of recreational marijuana sales revealed a massive demand than expected, although lower than the demand for medical marijuana. At the end of that year, the demand for recreational marijuana totaled $303 million in sales, $77 million short of medical marijuana demand. However, beginning January 2015, the market for recreational marijuana in Colorado expanded and exceeded medical marijuana orders. Recreational marijuana demand has since maintained an upward trajectory and overtook medical marijuana sales by November 2014. By the end of 2015, Colorado had sold $577 million worth of recreational marijuana, an improvement of $274 million over the previous year.

The demand for marijuana in Colorado has been on the upward trajectory up until 2022 when the market experienced its first dip. Data show Colorado's annual marijuana market size to be around $2 billion. Official Colorado marijuana sales figures indicate a peak of $43 million for medical marijuana in July 2020. This contrasts with the $15 million total revenue for medical marijuana for February 2023. Recreational marijuana sales also peaked in Colorado in July 2020 with a total of $183 million while the total for February 2023 is $109 million. Between 2014 and February 2023, Colorado has recorded a total marijuana sales of $14.2 billion.

How is Marijuana Taxed in Colorado?

Generally, states currently levy marijuana taxes based on weight, potency, and percentage of the price, and Colorado is no different. In Colorado, recreational marijuana is subject to retail marijuana sales tax and retail marijuana excise tax. Amendment 64 passed by Colorado voters in 2012 requires the state legislature to establish an excise tax on recreational marijuana. It also mandates spending the first $40 million realized yearly on public school construction. This amendment permits adults over 21 years of age to possess or consume up to one ounce of marijuana. It equally requires the state to come up with a structure to regulate the recreational marijuana industry. Also, in 2013, the voters approved Proposition AA, permitting Colorado to impose as much as 15% retail sales tax on recreational marijuana. This proposition equally allows the state to levy up to a 15% cannabis excise tax on raw recreational marijuana. Medical marijuana is subject to only 2.9% state sales tax, in accordance with the Taxpayer Bill of Rights (TABOR) Amendment limits. TABOR is an amendment of a part of Colorado's constitution adopted in 1992 by the state's voters. It provides control on the amount of revenue that can be retained and spent in the state. The amendment, in a way, limits the ability of the state government to grow its revenue over time. This means that the surplus medical marijuana sales tax collected beyond the established limit must be refunded to taxpayers in the next fiscal year.

The state also collects a 2.9% sales tax from recreational marijuana sales. In Colorado, localities can exact an excise tax on retail sales of marijuana. As required by state law, marijuana tax revenue is allocated to the General Fund. The revenue from the marijuana excise tax and sales tax in the General Fund are earmarked differently to education, transportation, and Marijuana Cash Tax Fund. Out of the 15% tax on marijuana recreational sales, the government appropriates 10% to local governments based on the percentage of marijuana recreational sales within the boundaries of such localities. Out of the remaining 90%, the government allocates 12.59% to the State Public School Fund, 15.56% to the General Fund, and 71.85% to the Marijuana Tax Cash Fund.

The government assigns marijuana excise tax revenue to the Building Excellent Schools Today Fund (BEST), an initiative that helps with the remodeling of public schools' buildings. The revenue appropriated to Marijuana Tax Cash Fund is usually disbursed for law enforcement, substance abuse prevention and treatment programs, health care, and health education. Funds must be utilized the year after disbursement for these purposes.

What is the Agency Taxing Marijuana Businesses in Colorado?

The Colorado Department of Revenue (DOR), among other functions, is tasked with collecting most types of taxes in Colorado. The Taxation Division of the DOR collects taxes from individuals and businesses, including marijuana businesses in the state. The division manages retail marijuana excise tax and retail marijuana sales tax. The DOR levies the retail marijuana sales tax on the sale of marijuana to the consumer. It collects retail excise tax on the transfer of recreational marijuana between marijuana business license holders. Marijuana businesses must file their monthly excise tax returns electronically with the DOR.

The DOR requires retail marijuana businesses to file their recreational marijuana sales tax return online]. The tax return should include recreational marijuana and recreational marijuana-infused products. Also, all marijuana businesses in Colorado must file the Colorado Sales Tax Returns (DR 0100) with the DOR. Similarly, medical marijuana and medical marijuana-laced products are reported on the DR0100. The DOR also requires marijuana businesses to file sales tax for medical marijuana online. Sales tax returns are due on the 20th of the month (or the next business day if the 20th falls on a holiday or weekend) after the reporting sales period.

In Colorado, the Marijuana Enforcement Division (MED) of the DOR regulates the recreational and medical marijuana industries. They also admit qualifying individuals and businesses into the marijuana industry through the issuance of licenses. The division provides regular updates on marijuana licensing and activities of licensed marijuana businesses. The DOR furnishes the public with marijuana sales reports and marijuana tax reports. The department also provides residents with valuable information on the distribution of Colorado marijuana tax revenue for each fiscal year since 2015.

Colorado taxpayers who intend to contact the DOR on general tax-related issues can do so by sending mail to:

Colorado Department of Revenue

P.O. Box 17087

Denver, CO 80217-0087

Residents who wish to contact the DOR by express mail delivery on tax issues can do so by addressing their concerns in a detailed letter, enclosed with supporting documentation to:

Colorado Department of Revenue

1881 Pierce Street

Entrance B

Lakewood, CO 80214

Alternatively, taxpayers can contact the Colorado Department of Revenue by phone or email. Residents contacting the DOR for tax payment issues can do so by mailing their payment vouchers to:

Colorado Department of Revenue

Denver, CO 80261-0004