How an accounting mistake brought Colorado pot smokers a tax holiday

Marijuana users will celebrate a one-day tax break on pot Wednesday after state officials made an accounting error. 

David Zalubowski/AP/File
Buyers make their purchases at the counter as a contingent of lawmakers, their staffers and a handful of lobbyists tour one of two retail and grow operations for both medical and recreational marijuana in northeast Denver, April 25. Colorado's unusual tax law is forcing the state to suspend taxes on recreational marijuana for one day, Sept. 16, during which a 10 percent sales tax and a 15 percent excise tax will not be collected.

An accounting error in Colorado has created a one-day pot-tax holiday Wednesday, suspending the state’s 10 percent sales tax for marijuana consumers and 15 percent excise tax on marijuana growers.

The break is happening because Colorado underestimated overall state tax collection last year and under the state constitution this mistake calls for the automatic suspension of any new taxes – including the marijuana tax approved in 2013.

The accounting error comes a day after Colorado made public its accounts for the fiscal year that ended in June, the first full fiscal year in which adults over 21 could legally buy marijuana.

Although the holiday is short-lived (the 25 percent tax returns on Thursday), pot retailers are hoping for big sales.

“Were ready for it,” Tim Cullen with Colorado Harvest Company told Fox31 Denver, “The stores are fully stocked and staffed. I think a lot of people will show up. I wish it were a Friday instead of a Wednesday, but they didn’t ask me.”

Recreational pot is steeply taxed — 25 percent, plus statewide and local sales taxes.

Colorado has already brought in more than $150 million in marijuana tax revenue, as The Christian Science Monitor reported earlier this month. And this summer, state officials reported that marijuana tax revenues were up nearly 100 percent, according to ABC7 Denver.

Compare this to alcohol tax, which ranges from 8 cents a gallon for beer to $2.28 a gallon for liquor plus sales tax, and it's evident the marijuana tax is making a pretty penny.

Last year Colorado witnessed an increase in all three alcohol taxes, with beer up 1.1 percent, liquor up 3 percent, and wine up 1.3 percent. Typically, states see a rise in alcohol sales in correlation with population growth. This year, Colorado did not see quite as high an increase as expected. However the consensus is still out on the correlation between marijuana and increased alcohol consumption, economist Daniel Rees says the Colorado’s numbers don’t show much.

“I wouldn’t read too much into one state’s experience,” Mr. Rees told the Associated Press.

This report includes material from the Associated Press.

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