Revenue from legalized marijuana in Colorado for the first half of 2015 is almost twice the same period from a year ago. This is great news for the state and may be good news for taxpayers as well. According to Colorado’s Taxpayer’s Bill of Rights (TABOR), any revenue that is collected beyond projections results in prorated refunds.
Though marijuana continues to be classified as a controlled substance for federal purposes, four states, including Colorado, have legalized recreational use with firm rules around its distribution and use. The businesses involved in the marijuana industry are also highly taxed for the privilege of entering this lucrative new market, and filing a federal income tax return is basically confessing to breaking federal law.
Despite these complications, many people have rushed to enter the industry. Colorado has the tax revenue’s to prove it, with $44 million pouring into the coffers in the first 5 months of 2015. The people paying all those taxes may have reason to be happy as well. With TABOR in place, refunds begin if marijuana tax revenues exceed $58 million for the year.
Colorado voters have the opportunity to allow the state to hold onto the tax windfall and apply it to public school and general fund needs instead of requiring refunds. Proposition AA will override TABOR and give the full tax revenue to the state if taxpayers agree to forego their refunds. With potential for almost $100 million in annual revenue from manufacture, distribution, and sale of marijuana products, the vote is vital. A no vote will mean that a complicated system of refunds would be enacted. The state would give cash refunds to specific taxpayers, such as marijuana growers, and reduce the sales tax on marijuana products by a substantial amount to start of 2016.