A bill designed to resolve a high-stakes standoff over taxing authority between Colorado counties and cities when it comes to recreational marijuana sales is expected to pass out of the legislature Monday.
But the measure, if signed into law by Gov. John Hickenlooper next month, may not stop a protracted legal battle between Adams County and three of its cities from winding up at the state’s high court.
House Bill 1203, sponsored by Rep. Steve Lebsock, D-Thornton, authorizes counties to levy and collect sales tax on recreational marijuana, addressing headlong a December ruling by the Colorado Court of Appeals that said Adams County had no power to do so. Under Lebsock’s measure, counties in Colorado would be able to impose a pot tax in unincorporated areas without challenge but would have to enter into an intergovernmental agreement with cities and towns to tax weed there.
“My bill encourages counties and cities to collaborate with each other,” Lebsock said.
Adams County caught the wrath of Commerce City, Northglenn and Aurora in 2015 when the three cities challenged the county’s decision to impose a 3 percent tariff on recreational pot sold throughout the county, regardless of whether municipalities had already instituted their own marijuana sales tax. The cities argued in their lawsuit that by layering an additional tax on a transaction, Adams County was putting their marijuana businesses at a competitive disadvantage to shops in nearby counties that didn’t have to charge an additional levy.
“No statutory or constitutional authority exists for a special sales tax, that is, a sales tax on particular types of items or transactions, such as a special marijuana sales tax,” the suit claims.
The appeals court agreed with the cities, ruling that even though the tax was approved by Adams County voters, the county “does not have either constitutional or statutory authorization to impose a special sales tax on retail marijuana.”
Lebsock said he hopes his measure serves as an acceptable workaround while Adams County continues its legal fight with its cities. Jim Siedlecki, a spokesman for Adams County, said, “We are still pursuing the case with the Supreme Court.”
Lebsock said the cooperative approach to recreational pot sales tax collection has already been demonstrated in Pueblo County, where last month the county and the city of Pueblo agreed to split a 3.5 percent county tax on pot. The city will get the lion’s share — 85 percent — of the proceeds.
“It would behoove Adams County to collaboratively work with the cities in the county so that the county can have a special marijuana tax,” he said.
Jodi Hardee, a communications specialist with Commerce City, said the city “supported this carefully negotiated and practical legislation that preserves fiscal fair play by guarding against unauthorized taxation,” but she said as far as negotiating tax-sharing agreements with Adams County goes, the city won’t make any decisions on how to proceed until the court case has been resolved.
Aurora city attorney Mike Hyman was less charitable, saying, “I don’t believe the city is interested in working out a deal with Adams County to tax our pot shops.”
“This is what should have been done in the first place because it has been our position all along that the county did not have the statutory authority to levy a tax on marijuana,” Hyman said of HB 1203. “It’s certainly a much better way of doing things than to have a county spring a tax upon you without consulting with you first, which is what Adams County did.”
The county has been collecting the tax since it first went into effect in July 2015. It has continued to do so even after the appeals court decision in December, Siedlecki said. He said more than $1.5 million has been collected so far and “is tracked separately” in the county’s general fund.
The bill in the legislature would be “a great resolution to the issue,” Kevin Bommer, deputy director of the Colorado Municipal League. “It’s not my call on what the cities should do next, but the door is open for collaboration, and taxpayers are protected from policy that would allow double taxation. It is well-crafted tax policy.”
Chip Taylor, executive director of Colorado Counties Inc., said Adams County feels like it has the legal authority to impose the tax and is defending that position all the way to the high court, which hasn’t yet decided whether to review the case. He said city residents still get services from county agencies, including the district attorney’s office and the human services department, so a county tax on marijuana could be seen as reasonable.
But he understands how a tax on one type of product, such as recreational pot, may run into choppy legal waters.
“I also recognize that a differential tax on a single product raises its own unique issues,” Taylor said.