Attorney General John Suthers has to admit: Medical marijuana can be taxed
Attorney General John Suthers has been the high-ranking state official most likely to imply that the sky is falling in relation to medical marijuana. No wonder he cheered a Colorado Court of Appeals ruling in the Stacy Clendenin case that aimed to tighten up the description of caregiver -- one that was tossed in Denver District Court when the Board of Health tried to adopt it too hurriedly.
Betcha it pained him, then, to issue an opinion that further legitimized the medical-marijuana industry. In response to an inquiry by Governor Bill Ritter's office, Suthers conceded that "Colorado law is clear: Medical marijuana, in most instances, should be subject to state and local sales taxes."
Click here to read the opinion in its entirety. But here are the key questions and answers:
Question 1: Is medical marijuana "tangible personal property" subject to the state sales tax under the Colorado tax code, section 39-26-104(1)(a), C.R.S.?
Answer 1: Yes. Medical marijuana is tangible personal property and is subject to the state sales tax, unless eligible for a specific sales tax exemption.
Question 2: Do transactions involving medical marijuana constitute "sales of drugs dispensed in accordance with a prescription" such that they would qualify for tax exemption under section 39-26-717(1)(a), C.R.S.?
Answer 2: No. Medical marijuana is not dispensed in accordance with prescription.
Question 3: Do medical marijuana transactions qualify for the agricultural tax exemptions under section 39-26-716, C.R.S.?
Answer 3: Generally not, except as discussed in response to Question 4, below.
Question 4: Does the form of marijuana sold or purchased alter the tax treatment of the transaction?
Answer 4: Yes. Pursuant to section 39-26-716 (4)(b), C.R.S., all sales and purchases of seeds are exempt from sales tax in Colorado. Other forms of marijuana sold or purchased would not qualify for this sales tax exemption.
Question 5: Regardless of the legality of the activity, are individuals and enterprises that engage in the sale of medical marijuana pursuant to Amendment 20 required to obtain a license and otherwise comply with the requirements of section 39-26-103, C.R.S.?
Answer 5: Yes. Unless subject to a particular exemption, it is unlawful under section 39-26-103(1)(a), C.R.S., for any individual or enterprise to engage in the business of selling at retail without first having obtained a retail sales license issued by the Colorado Department of Revenue.
Question 6: If such transactions are taxable, whose obligation is it to collect and remit any sales tax due for the purchase or sale of medical marijuana?
Answer 6: The obligation to collect and remit sales tax due is borne by the vendor.
Of course, the story doesn't end there. Suthers notes that "this formal opinion should help clear up many of the uncertainties surrounding the taxation of medical marijuana." But he adds, "Many other questions surrounding medical marijuana and Amendment 20 to the Colorado Constitution will have to be resolved by the courts or the Colorado Legislature."
Colorado senator Chris Romer has already taken up that challenge, and expect more elected officials at the state and local level to follow suit over the next weeks and months. This remains a burning issue -- but in a state suffering from a serious economic crisis, the notion that medical marijuana can be taxed is likely to persuade even the most adamant weed opponents that compromises must be made.
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