APPLY STATE SALES TAX TO MEDICAL MARIJUANA

A Taxing Problem

In 2000, Colorado voters passed Amendment 20 to allow patients to use
medical marijuana with a doctor's certification. Communities across
the state are grappling with the issue now. In Pueblo, City Council
has placed a three-month and the county commissioners a four-month
moratorium on whether to permit and regulate medical marijuana
dispensaries. (Colorado Attorney General John Suthers last week gave
Gov. Bill Ritter his formal opinion on applying the state sales tax to
the purchase and sale of medical marijuana. Here are excerpts:)

Colorado law is clear: Medical marijuana, in most instances, should be
subject to state and local sales taxes. This formal opinion should
help clear up many of the uncertainties surrounding the taxation of
medical marijuana. Many other questions surrounding medical marijuana
and Amendment 20 to the Colorado Constitution will have to be resolved
by the courts or the Colorado Legislature.

The formal opinion, available at

www.coloradoattorneygeneral.gov/ag_opinions/2009 ,

addresses:

Medical marijuana is "tangible personal property" and is subject to
the state sales tax, unless eligible for a specific sales tax exemption.

Medical marijuana is not dispensed in accordance with a prescription
(and, therefore, is not exempt from sales tax).

Medical marijuana transactions generally do not qualify for the
agricultural

tax exemptions (except for the sale of seeds). Unless subject to a
particular exemption, it is unlawful for any individual or enterprise
to engage in the business of selling at retail without first having
obtained a retail sales license issued by the Colorado Department of
Revenue.

The obligation to collect and remit sales tax due is borne by the
vendor (seller).

Amendment 20 (adopted by Colorado voters in 2000), left many legal
questions unanswered.

The Blue Book (legislative voters' guide) stated that under the
proposed amendment, possession of marijuana would still be illegal in
Colorado. Consequently, Amendment 20 provides certain protections from
state criminal liability for qualifying patients and primary
caregivers, but "nothing in the amendment protects their original
suppliers from prosecution or conviction on drug-related charges."

Further complicating the application of Amendment 20, federal law
prohibits the manufacture, distribution, dispensing or possession with
intent to manufacture, distribute or dispense marijuana. . . .

Despite the legal confusion surrounding the medical marijuana
industry, the taxation question is relatively straightforward. . . .
Colorado law contains no sales tax exemption for legally prohibited or
otherwise unauthorized sales. Sales of medical marijuana are subject
to state sales tax, unless a specific sales tax exemption applies.