Boulder marijuana sales tax revenues on the rise

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Leland Rucker | Boulder Weekly

The City of Boulder released its latest sales and use tax revenue report in July. It compares tax revenues from January to May of 2014 to the same period this year. The numbers show that Boulder is booming. Total sales tax revenue is up an impressive 6 percent from the first five months of last year, with computer-related businesses up 31 percent; Gunbarrel commercial by 20 percent; food stores and downtown Boulder by almost 11 percent each.

But when it comes to marijuana, the percentage leaps are more spectacular. Together, medical and recreational marijuana make up 2.21 percent of the sales tax revenue collected by the city. That’s a total for this year through May of $1,932,108.

Though medical marijuana revenues declined by 1.32 percent, recreational sales tax revenues from the city’s 15 retail stores jumped 121.8 percent from the first five months of 2014. The excise tax on the city’s 27 grow operations increased more than 400 percent.

Retail marijuana shops pay a 7.36 percent city sales tax on consumer sales. That added up to $359,310 from recreational marijuana in the first five months of 2014. This year the city collected $864,100 through the same period. Growers are charged an excise tax of 5 percent. That total revenue jumped from $77,791 in May 2014 to $400,643 this year.

There are good reasons for those higher percentages, and they can be easily misinterpreted. Much of the reason is because retail outlets weren’t fully operational until April 2014. Chief Financial Officer Bob Eichem is in charge of watching the city’s money. “Last year the business was just starting up, and very few places were open,” he explained in an email. “So this year’s numbers, which show them fully operational, are large percentage increases. Once we start comparing to months when businesses were fully open in 2014 (late in the year), the numbers will be smaller.”

Eichem said the city conservatively projected cannabis revenues this year because the state was discussing not sharing any state sales.

“They never followed through on doing so, though it is something we always have to keep in mind since the state budget does not occur on the same timeline as the one for the city. If more than the $1.5 million is collected, it will be allocated in the normal budget,” Eichem said.

The city won’t know until later this year if it will collect more than what was projected. “If there is money received over what is projected in 2015 it would be the staff recommendation that it be allocated in the 2017 budget process that will occur in 2016. That is what happens each year with all revenues if there are excess collections.”

The only caveat is if additional expenditures are being incurred above what was budgeted, City Council could appropriate additional amounts in the current year, Eichem said. “To date that has not occurred, and I do not expect it to occur in 2015.”

It’s also not accurate to assume from these numbers that marijuana businesses are all thriving and awash in money. There is no doubt that a marijuana business can be very successful in Boulder. But the current market is stratified, with a smaller percentage of businesses paying a disproportionate amount of the city’s sales taxes.

Without access to banking — though they are required to pay federal taxes but not allowed standard business deductions — and having to navigate a dizzying assortment of state, county and city regulations and rules, smaller businesses struggle.

“The myth of this is that it’s this lucrative business,” says Shawn Coleman, a lobbyist for local marijuana companies. “But the small mom-and-pop businesses face the same challenges as any other business.”

Pressure grows on the U.S. Congress to do something about marijuana’s classification and give legitimate state businesses that pay federal, state and local taxes access to basic banking services. There are literally dozens of bills in various committees of the U.S. House and Senate designed to end this logjam.

The new acting DEA head, Chuck Rosenberg, confessed last week that marijuana is not as dangerous as heroin, though they are both classified as such. It’s a simple, accurate assertion, one that his predecessor, Michele Leonhart, famously never would admit, with serious ramifications given how much money the federal government spends in its failure to keep citizens from using cannabis.

A nonpartisan national organization that represents state legislatures demanded last week that Congress overhaul federal drug laws and allow states to establish their own policies for marijuana and hemp. The tide is turning. It’s about time.

You can hear Leland discuss his most recent column and Colorado cannabis issues each Thursday morning on KGNU. http://news.kgnu.org/weed