Colorado Could Become First State to Regulate & Tax Medical Marijuana

By Laura Chapin, Thomas Jefferson Street blog

DENVER—There was an old hippy saying in the '60s: "If the government figured out a way to tax it, marijuana would become legal." As of last week, Colorado has apparently crossed that Rubicon—at least for the prescribed version.

John Suthers, the state's Republican attorney general, issued an opinion on Nov. 16 that yes, the state of Colorado does have the authority to tax medical marijuana. The opinion was in response to a request for legal clarification from Colorado's Democratic Governor (and former Denver District Attorney) Bill Ritter. The governor's office hasn't indicated whether they support taxing medical marijuana, they simply wanted an official opinion on the state's authority to do so.

Still, Conservatives clapped their hands over a new revenue stream. Liberals are happy that people who are sick and need help will get it. And a cash-strapped state may have found a way to relieve a bit of its budget crunch.

Legally, though, it's still tangled. Between Colorado voters approving a constitutional amendment allowing medical use as an affirmative defense against pot possession, and the Obama Justice Department announcing they would not go out of their way to prosecute medical marijuana users, dispensaries have been popping up like...weeds. There are 50 dispensaries in Boulder County alone (at last count).

The growing, uncontrolled market has led to calls for regulation, so Colorado could soon become the first state in the nation to set up a regulated business model for medical marijuana. As patient Janice Beecher, who uses marijuana for osteoarthritis, said, "I am alarmed by the ease in which I obtained my permit and would love to see some defined laws set down that puts some controls on the whole process, as I am afraid that it's spiraling out of control."

State Sen. Chris Romer plans to introduce comprehensive medical marijuana legislation in the next Colorado General Assembly, which begins in January. And his co-sponsor on the House side is Rep. Tom Massey, a Republican from rural Colorado.

"I think it's a generational split, not a partisan one," says Romer.

Unlike California, which treats dispensaries as non-profit collectives, Romer is upfront about approaching medical marijuana as a business enterprise, with all the attendant regulations, licenses, and taxes. The state would levy a 2.9 percent sales tax on dispensaries, and Sen. Romer's bill might allow cities to levy an excise tax of up to 20 percent. Starting Dec. 1, medical marijuana dispensaries will be subject to a 3.62 percent city sales tax. It's estimated this could generate up to $15 million for the state and up to $45 million in city and community taxes.

"We want a regulated competitive market place (on medical marijuana)," Romer says. "We want to let people make money, we want to let the free market flow, and since Colorado is a local control state we want that local government control."

The dispensaries—unlike just about any other business on the planet—are eager to pay taxes as a way to legitimize their business. As one dispensary owner told the Denver Post, "We are in favor of taxation...We are in favor of seeing new regulation come in and clean this industry up."

Law enforcement remains skeptical on some of the details—for example, they're concerned about public safety in terms of what professions would allow people use medical marijuana and still go to work. Potential criminal involvement in the supply chain also gets their attention. And Romer's bill would largely leave it up to the state's Department of Regulatory Affairs to draw up the specific regulations

Still, if the legislation makes it into law, Colorado will cement its reputation as the state where libertarians and hippies collide. Or as Romer puts it, "Colorado is a state where you shouldn't touch our guns, our liquor, our water, or our weed."

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