Marijuana tax collects half of revenue estimated by ballot

In this file photo, small marijuana plants grow inside the IgadI store located in Tabernash.
Art Ferrari / Special to the Sky-Hi News

After voters narrowly approved a ballot measure to increase taxes on marijuana, leading to a now-dismissed lawsuit, Grand County collected just over half of what voters were told the tax would create in annual revenue.

The measures passed in 2018 raised the county sales tax on marijuana by 5% and the excise tax, a tax on manufacturing marijuana, by 5%.

The county collected $236,809 from the 5% sales and excise taxes in 2019, according to county Finance Director Curtis Lange. The revenue is about half of what the ballot language estimated tax revenue would bring.

Because only one company grows marijuana in the county — IgadI in Tabernash — the sales and excise taxes were combined so as not to disclose the confidential financial information.

The ballot estimated that the increased sales tax would raise $310,000 in revenue and that the increased excise tax would generate $155,000 in revenue for the general fund, for a total of $465,000 in additional revenue.

After ballots were mailed out, IgadI raised questions about the revenue numbers. David Michel, general counsel for IgadI, said at the time that the numbers did not reflect the reality of the industry.

According to Michel, with IgadI as the only dispensary affected by the excise tax, the most revenue the town could receive from the tax would be $34,000.

Michel estimated that, as the largest dispensary in the county, IgadI would pay around $109,000 in sales tax. He said he believed the other two dispensaries affected by the county sales tax would not earn enough to reach the $310,000.

The county argued that the numbers were an estimate and that there were no legal ramifications for inaccurate estimates of a revenue number in the ballot language.

The ballot measures were narrowly passed in November 2018; the sales tax question passed by 693 votes and the excise tax question passed by 537 votes.

Michel went on to sue to the Grand County Board of Commissioners on his own behalf following the approval of the measures.

His petition said that projected revenues included sales that the county could not collect on and did not account for the costs to the county for collecting the revenue. He argued the fiscal impact was misleading to voters.

Grand County District Judge Mary Hoak dismissed the lawsuit in May with prejudice, meaning it cannot come back before the court.

The judge’s reasoning to dismiss was based on how she interpreted the merits of Michel’s case. She pointed out that county commissioners are not required to provide any fiscal information according to the statue cited by Michel, even if Michel was correct that they provided inaccurate or misleading fiscal information.

Michel also cited a Colorado Supreme Court case that included language about “fiscal impact” that formed the basis of the dispute. However, the judge found that Michel did not demonstrate that the “fiscal impact” described in the Supreme Court case was the same as the “fiscal information” at the heart of his lawsuit.

Grand County Commissioner Rich Cimino previously defended the information presented to voters in November 2018, saying that the estimates provided were based on the best available information.

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