Colorado Revenue From Recreational Pot Reaches $2 Million

Colorado
The February receipts are in and the Colorado Department of Revenue is reporting that the state brought in over $2 million in revenue on the sale and taxation of recreational marijuana.

The February receipts are in and the Colorado Department of Revenue is reporting that the state brought in over $2 million in revenue on the sale and taxation of recreational marijuana. At a time when many states are struggling to close budget shortfalls, Colorado may be in the enviable position of having extra money to spend, and in the unenviable position of having to decide who gets a piece of the pie.

Colorado is the first state in the country, and in the world, to have a fully regulated recreational marijuana industry. While other places may allow sales, they do not allow for growth or distribution. Colorado’s program covers every aspect of the industry from seed to sales. According to the Department of Revenue, the $2 million in taxes was generated from total sales of over $14 million. There are several state taxes that account for the revenue – the state sales tax of 2.9 percent and the state marijuana sales tax of 10 percent. But there are also local taxes which may apply so, in some cases, a consumer can end up paying upwards of 20 percent in sales taxes.

In addition to the sales taxes, there is an excise tax. The distributor is charged a 15 percent excise tax when the marijuana is first purchased from a the grower. The excise taxes is built into the selling price of the marijuana, but does not show up on a sales receipt as a tax.

What does Colorado plan to do with the extra revenue generated by recreational marijuana sales? The law that voters approved in 2012, Proposition AA, includes the requirement that the first $40 million in revenue go to the state’s Building Excellent Schools Today program. But that is just the tip of the iceberg. If sales and sales taxes continue to follow state projections, $40 million could easily be reached within the first year of sales. The Colorado Legislative Council estimates that, in the first year alone, the sale of pot could generate over $70 million in taxes.

Governor John Hickenlooper has recently submitted a $100 million proposal to the to legislature’s Joint Budget Committee to fund programs such as a marijuana use prevention program targeted at youth ($45.5 million), a program for substance abuse treatment ($40.4 million) and funding for general public health programs ($12.4 million). But that budget is based on conservative estimates of the revenue generated by pot sales. If the actual amounts increase or priorities change, citizen of Colorado will have to vote on where the remaining money goes.

Other states are watching closely in order to determine if similar laws and taxes will be able to increase their revenue flow at a time when they are hurting for income. According to a study conducted by the Pew Research Center in 2013, national attitudes toward recreational marijuana and marijuana in general, continue to change toward approval of legalization, which makes passage of similar laws in other states likely in the near future.

While Colorado passed the law legalizing the sale of recreational pot in 2012, actual sales did not begin until early this year. Currently, Colorado has approved over 150 licenses for recreation pot sales but currently only a fraction  – by one estimate, 37 – of those businesses are actually operating. Now that the law has gone into effect and Colorado has generated $2 million from recreational pot sales, other states will be watching to see how Colorado handles the fights over what to do with the extra revenue.

By Dan Reyes

Colorado Legislative Council
Colorado Department of Revenue
Pew Research
Forbes
Huffington Post

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