Colorado weed tax goes up in smoke

An accounting error in Colorado is paying off for marijuana consumers Wednesday, when a quirk in a state tax law prompts the state to suspend most taxes on recreational pot.

The one-day pot tax holiday means Colorado won't collect 10 percent sales taxes on pot. The state is also suspending a 15 percent excise tax on marijuana growers.

The tax break is happening because Colorado underestimated overall state tax collections last year. Under the state constitution, the accounting error triggers an automatic suspension of any new taxes — in this case, the recreational marijuana taxes voters approved in 2013.

Retailers are hoping for big crowds, rolling out bargains to attract shoppers. The state had no estimate on how many shoppers might turn out.

The taxes revert to 25 percent on Thursday. Wednesday's break comes a day after Colorado made final its accounts for the fiscal year that ended in June.

The final tax numbers covered the first full fiscal year in which adults over 21 could legally buy both marijuana and alcohol. Alcohol excise tax collections were up 2.4 percent, to about $42 million. Marijuana-specific taxes came in at about $70 million.

The figures don't include a statewide 2.9 percent sales tax. In other words, alcohol likely still produces more overall tax money than pot, though the state doesn't keep data on how much general sales tax comes from alcohol.

Recreational pot is taxed much more steeply than alcohol — 25 percent, plus statewide and local sales taxes. Alcohol is taxed by volume, ranging from 8 cents a gallon for beer to $2.28 a gallon for liquor, plus sales taxes.

Colorado saw an increase last year in all three tax classes of alcohol. Beer was up 1.1 percent, liquor was up 3 percent, and wine was up 1.3 percent.

The pro-legalization Marijuana Policy Project lauded the sales tax holiday as “a much-deserved day off” for marijuana consumers, who carry a heavier tax burden than people who buy alcohol.

However, it's far too soon to say how marijuana legalization has affected behavior when it comes to consuming intoxicants. A University of Colorado-Denver economist who has studied how marijuana availability impacts alcohol consumption said the Colorado numbers don't show much.

Economist Daniel Rees pointed out that beer sales growth didn't keep up with population growth in the last year, estimated at about 1.7 percent between 2014 and 2015.

“I wouldn't read too much into one state's experience,” Rees said.

The Associated Press