Colorado’S Crazy Marijuana Tax

[bobandtorey]

Taxing what you can’t measure is nonsense. But Colorado voters were poised Tuesday to do just that, by taxing wholesale marijuana sales at 15 percent — when no wholesaler exists. That’s right: Most Colorado adult-use marijuana sales must go directly from producer to consumer with no wholesaling allowed, and no wholesale price as a measure for the wholesale tax! That’s because Colorado law, at least at first, requires vertical integration of marijuana businesses.

 

Vertical integration? Here’s an example: A wine company owns land, vines and a winery, and sells to consumers only at its own outlet store. Substitute “marijuana grow area” for land and vines, “marijuana production facility” for winery and “marijuana retailer” for outlet store, and you understand the Colorado model. Colorado law will require that at least 70 percent of marijuana sales follow that model, with the supply chain integrated vertically (from top to bottom) — and with no wholesaler.

 

So how do you apply a wholesale level tax when no wholesaler exists? With great difficulty. Colorado regulatory authorities are struggling for answers.

Basing a tax on a fictitious price means no one will ever know the correct tax. Taxpayers will spend time and money trying to beat the system, and government will spend time and money in self-defense. Government and business are likely to grow irritated with one another as they argue about unanswerable questions.

Our dysfunctional international income tax system should have taught us that taxing what we can’t measure is crazy. Multinational corporations like Google, Amazon and Starbucks pay little tax anywhere as they transfer assets among subsidiaries. What do they charge themselves for those assets? (How much does the right hand charge the left hand?)

Current transfer pricing rules allow multinational corporations to construct artificial prices for sales between related parties, sales that almost never occur in the marketplace. “Fabled tax wizards” working for multinationals come up with a “tax return position” — the company’s view of how much tax it should pay. (Not much, and often zero.) Why make the same mistake — opening the door to artificial pricing — in taxing marijuana?

 

Back to Colorado’s tax mess, and its warnings: Vertical integration (the no-wholesalers rule), imposed by the Legislature in 2013, could coexist easily with a tax based on weight or potency. That is, to tax marijuana at so many cents per gram, you never need to know the price. But a price-based, wholesale level tax was locked into place by Colorado’s 2012 initiative (which did not require,

forbid or address vertical integration at all). Colorado’s wholesale, price-based tax would be administrable without vertical integration, because without it, real, separate wholesalers want to receive high prices, and their real, separate customers want to pay low prices. With that tension, there’s a real, bargained-for market price to base taxes on.

 

Meanwhile, Washington State’s law taxes newly-legal marijuana at wholesale, too, but Washington avoids Colorado’s problem by forbidding vertical integration — so related-party sales can’t happen

That is, wholesalers are separate from retailers, so the wholesaler will get an arm’s length, fair market value price from the retailer. That means the Washington State price-based wholesale tax will be related to reality. No fuss, no muss.

We are just at the beginning of figuring out how to regulate and tax marijuana. Other states thinking about legalization need to study the primitive example of Colorado’s tax, and avoid the pitfall.

The obvious answer is to forget price and adopt a surer tax base like weight or potency, following Federal precedents for alcohol and tobacco. Or, if states want a price-based tax for some reason, they can delay measuring it until there’s an actual arm’s length sale to an unrelated party. But here’s the clear lesson for future legalizing states: If you require or allow vertical integration, a wholesale tax on prices — when there is no actual sale — is crazy. It’s the kind of tax whose only fans will be tax professionals, billing by the hour.

 

 

http://www.cannabisnews.org/colorados-crazy-marijuana-tax/2013/11/09/

[trichcycler]

I have to read this a couple more times, thank you for this. beware though, its come to my attention talking about those kinds of out of state policies here at the forum will somehow be the deciding factor for our state to follow suit, possibly further restricting our act.  maybe our state don't read the rest of the net? and only this forum..that must be it

Edited November 9, 2013 by grassmatch

[Kingdiamond]

I have to read this a couple more times, thank you for this. beware though, its come to my attention talking about those kinds of out of state policies here at the forum will somehow be the deciding factor for our state to follow suit, possibly further restricting our act.  maybe our state don't read the rest of the net? and only this forum..that must be it

The rest of the forums are not medical marijuana support websites I'm sure now your just attempting to be a smart alec and your truly being naïve on this subject .

[t-pain]

.

Edited November 10, 2013 by t-pain

[t-pain]

that, or mpp is terrible at drafting legislation. as we've seen in multiple states.

Edited November 10, 2013 by t-pain

[bobandtorey]

That was my point in posting this just to show how things can go and imo Cannabis can not be taxed as easy as we think it can be 

and as far as giving the heads up to the people that work in Lansing the idea if they use this as a way to do anything am not worried Lol

[imiubu]

That was my point in posting this just to show how things can go and imo Cannabis can not be taxed as easy as we think it can be 

and as far as giving the heads up to the people that work in Lansing the idea if they use this as a way to do anything am not worried Lol

 

tehe 

 

[trichcycler]

Please stop stalking me. I did not direct this towards you, but the hoards of messages I got from others. I already told you that your bullying was water under the bridge for me. Can you put it threre, or shall we engage further?

If that's your choice, be kind, don't shred this thread also. To avoid the risk of censorship, please start your own thread to bully.

For clarity-Your paranoia insisted that the mere mention of a pesticide TRUTH(x2million results),  in this forum would somehow be the deciding factor in further restricting our Act. (surely the fault of sprayers rather than posters of the news eh?)

If you truly cared about the Act you would consider STOPPING your chemical romance, and implement proper safety measures, and STOP attacking those who are steps ahead of you in this, and have decided to not use chems on their meds. Wont you stop, please already, you will feel better, and your paranoia may subside.

 

As the very first poster to defend the practice of spraying meds with botanical oils, even though expressly forbidden by our whole country currently, and we know that only a few growers practice the nasty, you are the problem, not news and information.

 You've been informed, otherwise warned,and now have a choice, will you continue to spray?  That's really all that matters here right, beside your ego maybe, but patient safety is priority one for most of us.

You have an opportunity(again) to be water under the bridge here. A marijuana support group should welcome news of Patient safety, advocacy, and health. Especially when it's leaders are running astray.

 

go bully elsewhere please?

The rest of the forums are not medical marijuana support websites I'm sure now your just attempting to be a smart alec and your truly being naïve on this subject .

Edited November 10, 2013 by grassmatch

[bobandtorey]

For over 40 + years Cannabis users were ready for taxing Cannabis but today after we have had a tasted of the good life know one wants to go back to the old days 

[trichcycler]

That's a good point !!  Most of us are still alive now, but there are many many more of  the next gen. I'll listen, because often their views are fresh, and smarter than my old dusty ones.  They'll take the reigns soon, and what an exciting movement now, with more force than ever!

For over 40 + years Cannabis users were ready for taxing Cannabis but today after we have had a tasted of the good life know one wants to go back to the old days 

[bobandtorey]

“We know there are hundreds, if not thousands [of medical grow ops in the Metro Area  “ we’ve had three or four people indicate they’ll be applying for a commercial license  What about all the others?”