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Marijuana: Denver City Council recommends lower sales tax out of fear higher one would fail

Denver City Council has marijuana on the brain, though sadly not in the way we would like to see.

Council spent most of yesterday dealing with marijuana issues, starting with a three-hour committee meeting focused largely on zoning and ending with a lengthy council meeting spent debating marijuana tax proposals. A majority eventually opted for a lower sales tax rate than originally envisioned, in part because of fears voters would reject a higher one.

Specifically, the council preliminarily agreed by a 7-6 margin to move forward with a 3.5 percent special sales tax on marijuana that could be raised to as much as 15 percent down the line. Denver Mayor Michael Hancock had initially urged council to set the tax rate at 5 percent, but a report from Denver Auditor Dennis Gallagher projected that a 5 percent rate would likely fail if put to voters.

A final vote on the rate will take place at the council's next meeting, Monday, August 6, and the public will be given an opportunity for comment before members weigh in. If approved, the tax proposal will go before Denver voters in November along with the proposed 25 percent combined excise and sales tax agreed upon at the state level.

A group photo of Denver City Council.
A group photo of Denver City Council.

Since the bill was touted to regulate marijuana "like alcohol," it's worth noting that Denver does not have a special alcohol tax -- and council members couldn't enact one if they wanted to, according to state law.

Booze is taxed the same as all other general retail sales tax items. Instead, the state collects an alcohol excise tax based on volume: $.08 for every gallon of beer, $.0733 for every gallon of wine and $.6026 for every liter of liquor. Even so, the rates are nowhere near as high as those envisioned for cannabis. On an average, mid-priced liter of gin, you'd be paying about 8.6 percent in tax. A keg of beer would come out to be about .66 percent.

Among the main issues raised in the committee meetings was zoning for recreational marijuana shops and whether or not public hearings would be required before a medical marijuana dispensary could switch over to a recreational shop.

Local marijuana attorney Warren Edson notes that council decided not to mandate what are known as "needs and desires" hearings before a recreational marijuana dispensary could open. Such hearings are required for establishments that sell alcohol and require people to testify or sign their names to a petition that says they want that establishment in their neighborhood, because they;d like to have access to alcohol.

Such hearings for marijuana were shot down, Edson says, after several council members pointed out so long as marijuana remains federally illegal, few citizens would want to testify on record that they want or need the herb.

Continue for more about the Denver City Council and marijuana regulations.

 

But while the needs-and-desires hearings are off the table, council did agree on a proposal by Councilman Paul Lopez to expand who could cross-examine a recreational cannabis applicant in a public hearing to include citizens who live within the nearby neighborhood, council members and representatives from neighborhood and home-owner associations.

"It's a nice, folksy idea, but holy crap," Edson exclaimed. "That's like having a defense case where all of the victim's family members get to question the defendant."

At the least, Edson thinks allowing more people to cross-examine ganjapreneurs will slow down applications to a slug's pace.

Interestingly, the hearings will only apply to recreational cannabis retail stores. Grow operations, labs and infused-product manufacturers that want to convert or change locations won't have to go through such hearings. The logic behind that baffles Edson: He points out that the majority of complaints he's seeing in the medical cannabis world are about stinky grow operations, not storefronts. Edson says one RiNo district business owner testified that he has to schedule client appointments around the harvests of a nearby grow to avoid the stinky days of the month.

"It's like, 'Huh?' The ignorance of that clearly shows they think that sales of [marijuana] is the bad part," Edson says.

Other points covered by the committee included requiring recreational stores to shut down at 7 p.m. just like medical dispensaries, allowing recreational grow operations within 500 feet of residential areas, allowing centers to move locations and increasing the bond that dispensaries have to put up from $5,000 to $20,000.

For potential recreational shop owners and dispensary owners looking to convert, Edson says the new rules, not to mention a bond four times larger than in the MMJ world, represents a lot to process in a short amount of time. Council is set to hear the proposals at its September 9 meeting. If members move forward on schedule, the final vote would take place on September 23, giving applicants only about seven days to get their ducks in a row and come up with twenty grand.

As Edson points out: that could put quite a delay on shops planning to open by January 1.

More from our Marijuana archive: "Inside recreational and medical draft rules" and "Cannabis Time Capsule, 1908: Egypt's ban of Greek hash makes headlines in Westcliffe."


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