Steamboat City Council seeks to place 5 percent tax on marijuana before voters
Editor’s note: This story was updated at 9:40 a.m. Thursday, July 19, to correct that the school tax rate is 0.5 percent and the state sales tax rate is 2.9 percent.
STEAMBOAT SPRINGS — The Steamboat Springs City Council has put the ball in motion to place a 5 percent sales tax on marijuana before voters in November.
During Tuesday’s City Council meeting, city attorney Dan Foote was instructed to bring forward a resolution that would put a 5 percent tax on retail and medical marijuana sold in Steamboat Springs on the ballot. If passed, the tax would sunset after 10 years.
Revenue from the tax would benefit community support, police services and parks and recreation youth programming. The measure is forecast to generate $613,000 per year based on present sales, according to documents included in the meeting’s agenda packet.
“It goes toward our number one goal on our list — fiscal sustainability,” said Council President Jason Lacy. “And it provides stability for what I consider to be important community support program funding, which in future years, under our current revenue structure, might be hard to maintain.”
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Marijuana products in Steamboat Springs are currently taxed at the following rates.
- 15 percent state excise fee on recreational marijuana paid by the marijuana company when it is moved from a cultivation center to a retail store.
- 15 percent state sales tax on recreational marijuana paid by customers at the point of sale.
- 2.9 percent state sales tax on medical marijuana paid by patients at the point of sale.
- 4 percent Steamboat Springs general sales tax, which applies to medical and recreational cannabis, paid by customers at the point of sale.
- 1 percent Routt County general sales tax, which applies to medical and recreational cannabis, paid by customers at the point of sale.
- 0.5 percent Steamboat Springs school tax, which applies to medical and recreational cannabis, paid by customers at the point of sale.
“Something we have to remember as well is that as more states get into the marijuana business, that revenue and that number could go down,” said council member Robin Crossan.
She added that council, the community and, particularly, the Human Resource Coalition — one of the proposed tax’s core beneficiaries — need to understand that revenue from the tax could fall as the marijuana industry grows.
This proposed ballot measure evolved from an earlier council conversation that would have placed a sales tax on packaged alcohol, marijuana, tobacco and nicotine products. A tax on all four products was initially brought forward during the meeting, but City Council decided to move forward with a marijuana-only tax, at least for the time being.
Council member Sonja Macys said she was “particularly concerned about the alcohol tax.” Alcohol is taxed at the federal level, she said, adding that the city “hasn’t done much to tax” marijuana.
“I feel like we’re really missing an opportunity here, and we’re essentially double-taxing another product by including alcohol,” Macys said.
“Marijuana pays an outrageous amount to the state that alcohol doesn’t pay, so I guess I don’t really buy into that argument,” council member Lisel Petis said. “I think it should be treated all the same.”
Council member Kathi Meyer worried that Steamboat would be targeted by trade associations should an alcohol tax be placed on the ballot – only one other Colorado municipality, Denver, has a liquor tax, she said.
“They will spend whatever it takes to defeat it if we include alcohol,” Meyer said, who was the first council member to propose the marijuana-only tax.
During public comment, Rich Tucciarone, co-owner of Mountain Tap Brewery, expressed his opposition to the tax. Under the tax initially proposed, growler jugs and cans sold at Mountain Tap would face a 2 percent tax.
“It’s very expensive to do business here,” he said. “It’s nearly impossible to find staff. Increasing taxes on commonly purchased items like beer and wine will only exacerbate Steamboat’s extraordinarily high cost of living, which translates to a limited labor pool across all industries.”
Steamboat is home to three marijuana dispensaries, all of which sell medical and recreational cannabis products.
“Tax rates at the excise and sales level for adult-use marijuana are already so high that there’s a reason why we see a continuing, robust black market in Colorado, and that’s because it continues to be more affordable than regulated centers that have to pay for testing, payroll taxes, unemployment insurance, workman’s comp — all these things that regular businesses have,” Rocky Mountain Remedies co-owner Kevin Fisher told Steamboat Pilot & Today in June. “When you continue to levy tax after tax after tax, eventually there’s a breaking point.”
“The bottom line is, like any tax, this ultimately gets transferred to the customer,” said Paul Franklin, an investing partner of Billo.
He is concerned that the increased cost will make Steamboat a more expensive place to live and drive tourists to other resort towns such as Breckenridge, Vail or Aspen.
“Margins are not what people think they are,” Franklin said. “We have to grow our own in Steamboat with our license. The cost to grow your own is substantial. It is going to hurt us, absolutely. I don’t know how much more I can emphasize that.”
A clause in federal tax code prohibits marijuana businesses from deducting most expenses from their reported income, as most other companies do. The marijuana industry is only allowed to deduct the cost of goods sold.
Matt Kilby, Billo’s chief operating officer, added that their company fully supports the causes that currently benefit from marijuana tax revenues as well as those that would be supported by the proposed tax.
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