Around State, Many Municipalities Have Reaped Benefits
For the first time in at least five years in January, the category of “grocery and drug” became the biggest source of sales-tax revenue for the city of Durango, generating $373,436, a growth of 5 percent over the previous year.
It could be higher food prices and the popularity of organic supermarkets. Or, it could also be the city reaping the bounty of medical marijuana sales.
On the state level, medical marijuana sales are growing like weeds. State sales-tax revenue more than doubled between 2010 and 2011, growing from $2.2 million to $5 million, according to the Colorado Department of Revenue.
On a local level, it’s difficult to gauge the financial impact of this emerging industry that’s mostly cash only. The city won’t break down its sales-tax category of “groceries and drugs” to provide separate information for medical marijuana, which is what cities such as Boulder and Colorado Springs do on their websites.
Julie Brown, the director of finance for the city of Durango, does not think the tax contributions of the medical marijuana industry are significant.
“Generally, I would state that the revenue from medical marijuana is not adding large dollar amounts to the sales-tax revenue,” Brown said in an email.
La Plata County also taxes medical marijuana dispensaries in Durango but categorizes it as “other retail,” separate from general merchandise and food and beverage stores.
The sales-tax revenue from “other retail” increased by about 19 percent over the last year, generating $271,633 in January. In contrast, the county’s sales-tax revenue for food stores grew by 6 percent.
The city of Durango won’t release sales-tax data for medical marijuana at an industry level out of concern it would be disclosing proprietary information. It does provide sales-tax information for other types of businesses, such as hotels and department stores.
But City Clerk Amy Phillips said medical marijuana is a relatively small industry.
“There are only 10 of them ( businesses ),” she said.
Advocates for the medical marijuana industry, however, welcome the publicity of providing much-needed revenue for local governments in these hard economic times.
Colorado Springs, for example, is getting $60,000 a month in sales tax from medical marijuana.
“We were in a situation where we were cutting off our street lights,” said Tanya Garduno, the president of the Colorado Springs Medical Cannabis Council. “Because of the new funding, we’ve been able to put our street lights back on.”
Garduno recently took over Nature’s Own Wellness Center, a medical marijuana dispensary in Durango. She appreciates the legitimacy that taxation brings to medical marijuana.
“For every dime taxed, we know that it’s not being spent on the street or in the black market,” she said.
Because of the tax boom, Brian Vicente, director of Sensible Colorado, an advocacy group for medical marijuana, thinks some cities might reconsider their positions about the industry.
“I think cities that have banned them are going to realize they’re losing out on considerable revenue,” he said.
Prescription drugs are not normally taxed, but a legal opinion by the state attorney general in 2009 opened the door for the sales taxes on medical marijuana.
Some in the medical marijuana community have mixed feelings about the sales tax.
On the one hand, it’s “bad public policy” to tax medicine, said Vicente. On the other hand, patients appreciate the convenience of not having to buy their marijuana in a back alley.
In November, Colorado voters could take a further step toward legitimizing marijuana by voting for an amendment to legalize it and regulate it like alcohol. The push for acceptance comes as the federal government is taking a harder line against medical marijuana.
Dispensaries within 1,000 feet of schools have been threatened with prosecution by the U.S. Attorney General. Banks in Colorado have declined to do business with medical marijuana dispensaries out of fear they might lose federal banking insurance and risk federal prosecution for racketeering, medical marijuana advocates said.
State legislation to create financial cooperatives for medical marijuana businesses died in committee out of a concern that they would not work if not backed by federal insurance, said Jenifer Waller, senior vice president for the Colorado Banking Association.
“Until there’s a solution at the federal level, there’s not going to be a solution at the state level,” Waller said.
Without banking services, medical marijuana dispensaries have to improvise.
“I work a lot from pre-paid Visas and have a very large safe,” Garduno said.
Some proprietors use personal banking accounts or business investment services that provide checking to their customers, Garduno said. Because many dispensaries take cash only, they provide ATMs in their stores.
With the large amount of cash being transacted, advocates worry for the safety of employees and customers.
Garduno thinks the hard line against medical marijuana is election-year politics. President Barack Obama wants to show he can be as tough as a conservative, she said.
If conservatives were true to the philosophy of state rights and libertarianism, they wouldn’t have a problem with medical marijuana, Garduno said.
Because the “genie is out of the bottle,” Vicente does not think the next president will try to outlaw medical marijuana.
“It’s hard to imagine the federal government shutting down a state-regulated industry, but it’s certainly possible.” Vicente said.