High taxes being disputed by cannabis advocates and vets

You would think Larisa
Bolivar would be happy, maybe even euphoric, about cannabis legalization in
Colorado. As a cannabis activist for more than a decade, Bolivar opened one of
the first medical cannabis dispensaries in Colorado, and helped found Denver’s
420 Rally. She endured a federal raid, witnessed the massive expansion of
medical cannabis in Colorado and helped other cities develop medical cannabis laws.
In Colorado, she was able to experience what had been a pipe dream for generations
of cannabis users: Full legalization of the “devil weed,” with the first legal
sales for recreational purposes in modern history beginning January 1.

But Bolivar and other
longtime Colorado cannabis activists aren’t happy about how legalization has
been rolled out. Claiming that taxes on recreational cannabis are too high,
they sued the state this past summer in an effort to have the taxes declared
unconstitutional and taxes refunded.

“I just can’t imagine
anyone in Denver wanting to pay 21 percent in sales taxes, just because it’s
legal,” said Bolivar, one of the plaintiffs in a group known as “No Over
Taxation.”

“Cannabis users should be
outraged . . . We’re lower in numbers, so it’s easy to tax us.”

Not only has the dispute
shown cracks in what was once a united front of cannabis advocates, but some in
the industry worry a legal ruling could strike down the entire tax and
regulatory structure put in place since voters approved legalization in 2012.

One Colorado-based Cannabis
Therapy Institute warned in a news release, “If successful, (the) lawsuit could
be the basis for overturning all regulations regarding marijuana licensing and
registration in Colorado on the same grounds.”

Cannabis
sold to voters

One of the central tenets
of the ballot measure was that state and local governments could generate tax
revenue from cannabis sales and that the black market would dry up. That helped
the measure win a resounding victory, with support among liberals and
conservatives.

After an initial wave of
buying euphoria, tax revenue has come in below expectations. The state’s
medical cannabis registry continues to grow and a robust “grey market” has
thrived, with illegal resale of medical and black-market herb.

Bolivar blames taxes. While
medical cannabis is taxed at 7.6 percent, recreational sales are taxed as high
as 21 percent or more, under a voter-approved excise tax and local taxes. That’s
lower than the state’s 34 percent tobacco tax, but much higher than taxes on
alcohol. In some areas of the state, that’s the difference between a $30 eighth
of medical cannabis and a $60 eighth of recreational.

She said that taxes force
lower-income users to the black market.

“To say that people are
going to go to store and pay 20 percent taxes just because it’s legal is an
insult to that person’s intelligence,” she said.

Multiple
legal challenges

The first argument of the
suit, filed by Denver attorney Rob Corry, explains that cannabis is illegal
under federal law so by paying taxes, sellers and users are incriminating
themselves in a violation of federal law, prohibited under the Fifth Amendment.

The suit also argues that
state and local governments can’t generate revenue from a federally illegal
activity and that the taxes are so high they make it impractical to run a
business. Another claim seeks the return of tax revenue generated from what is
considered illegal activity.

During a hearing in August,
Denver District Court Judge John Madden declined to issue an immediate
injunction on the collection of the taxes. According to The Denver Post, none of the plaintiffs who testified own
recreational cannabis dispensaries and could show an immediate threat of
prosecution. There was also no evidence that federal prosecutors are targeting
such stores or their customers over paying taxes.

But the case will proceed
in the coming months and is being closely watched by the cannabis industry.

For her part, Bolivar
doesn’t worry about a ruling overturning all cannabis regulations and taxes in
Colorado. She said legalization isn’t in jeopardy, since that was a
voter-approved constitutional amendment separate from the taxation law passed
by voters.

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But, she said, “Maybe a can
of worms needs to be opened. What do they need this money for? Why are they
taxing us, the minority?”