County faces lawsuit following approval of marijuana ballot measures
December 12, 2018
A representative of a Tabernash dispensary is suing the Grand County Board of Commissioners following the approval of two county ballot measures increasing the sales and excise taxes on marijuana.
David Michel, general counsel for IgadI, Ltd., the dispensary in Tabernash, filed a petition on Dec. 1 in Grand County District Court that contests the results of ballot measures 1A and 1B, claiming that voters were misled by the fiscal impact statements included with each question.
Ballot measure 1A asked residents whether the county should increase sales tax on retail marijuana by 5 percent to increase tax revenue by $310,000. Ballot measure 1B asked whether the county should increase excise tax on retail marijuana for 5 percent to raise $155,000 in tax revenue. Voters passed both measures.
The petition seeks to overturn the sales and excise taxes, as well as to enjoin the county from collecting the taxes until the adjudication of the case is complete, on the basis that the tax revenue numbers were calculated improperly.
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According to the petition, the county finance director Curtis Lange calculated that the amount of sales of retail marijuana in the county in May 2017 represented 5 percent of the total annual retail marijuana sales in 2017, which he said was $4.2 million. He used that information to project that the May 2018 revenue numbers would represent 5 percent of the total revenue, which he projected would be $6.2 million.
Using that projection, Lange calculated that a sales tax of 5 percent on $6.2 million would raise around $310,000 in revenue.
Michel, who had brought his concerns to the board of county commissioners ahead of the election but after ballots had been mailed out, argues in his petition that the projected revenue number includes sales that occurred in the town of Fraser, which would not be subject to the new taxes since Fraser already charges a special 5 percent sales tax on retail marijuana.
He also argues that the revenue number didn't reflect the cost to the county or retailer to collect the taxes. Lange estimated that it would cost the county roughly $30,000 to collect the sales and excise taxes.
The retailer would also be allowed to retain 3.33 percent of the total sales tax collected to cover the administrative cost of collecting and remitting the tax. Neither this cost nor the cost to the county was deducted from the revenue number cited in the ballot language.
For the excise tax revenue number the petition said that Lange used the $6.2 million revenue figure and calculated that at a 100 percent markup, retailers would pay $3.1 million in wholesale marijuana. A 5 percent excise tax on $3.1 million would be $155,000.
However, a retail marijuana excise tax, which taxes the production of marijuana, would apply only to the marijuana cultivated in Grand County, not to the total amount wholesaled in by retailers.
The state charges a 15 percent retail marijuana excise tax using the average market rate of a pound of marijuana, which the state values at $759.
Currently, IgadI is the only dispensary that cultivates marijuana in Grand County. Michel estimated that a 5 percent excise tax on the amount of marijuana cultivated by IgadI in 2017 would be around $34,272 in taxes.
Considering this information, Michel argues in his petition that the fiscal impact is without adequate basis and therefore misleading to voters.
As of Wednesday, the county had not filed anything in response to Michel's petition and interim county attorney Maxine LaBarre-Krostue declined to comment.
Read the complete filing: