Colorado Supreme Court won't hear Adams County marijuana tax case, but new law provides needed clarification 


click to enlarge Local governments fight over money. - CHARLES KNOWLES /SHUTTERSTOCK.COM
  • Charles Knowles /Shutterstock.com
  • Local governments fight over money.

The Colorado Supreme Court won't hear a case that pits a Colorado county against three cities within its boundaries in a dispute over who has the authority to levy special sales taxes on retail marijuana. The decision, made June 19, means that the lower court's order against Adams County remains in place, though a new law will provide the legal guidance these jurisdictions need to proceed in a way agreeable to all the parties.

As previously reported in CannaBiz ("Pueblo County to continue collecting tax while city prepares for retail pot," Jan. 11), the case arose soon after the legalization of recreational marijuana. Adams County asked voters to approve a 3 percent special sales tax on retail marijuana, voters obliged, and the tax went into effect in 2015.

Three cities within the county — Commerce City, Northglenn and Aurora — sued in district court, arguing the county doesn't have the right to tax a single product. Plus, they said, given their own municipal marijuana taxes, the county's tax put their shops at a competitive disadvantage compared to say, Denver, where taxes are lower. Adams County argued that the 2014 vote, which included majorities in the litigious cities, gave them the green light.

Since the special sales tax went into effect, the county has raised nearly $2 million according to The Denver Post. It was used, in part, to fund college scholarships for underprivileged students.

The case made its way up to the Colorado Court of Appeals, which ruled in favor of the cities. In a written opinion, the judges wrote that "unless the General Assembly or Colorado Constitution authorized the county to impose such a tax, the county simply does not have the power to enact such a tax, irrespective of a valid election." When the ruling came down in December, Adams' tax revenue hung in limbo without any guidance as to what the county should do with all that money. And, with the higher court's refusal to hear the case, that confusion remains.

The ruling might have affected Pueblo County too, since a similar circumstance with county and city marijuana taxes exists there. Pueblo County had budgeted that revenue for expenditures on public safety, arts and culture, scientific research and social services. In January, Pueblo County's budget and finance director notified recipients of those funds there would be a "delay and possible inability to fund [the projects]" while the Board of County Commissioners stated it was "poised to pursue all legal and legislative avenues to preserve its authority to impose its sales tax."

Now, the legislative solution has arrived. A new law "concerning the authority of certain local governments to levy a special sales tax on retail marijuana in certain circumstances subject to voter approval by the eligible electors of the local government" was signed on May 5. If that title sounds awfully specific, that's because it is — the legislation was expressly designed to clarify the statutory ambiguity that parties in the Adams County case were straining to interpret.

The bill was brought by two Adams County legislators (Sen. Beth Martinez Humenik, R-Thornton, and Rep. Steve Lebsock, D-Thornton) and one Pueblo legislator (Sen. Larry Crowder, R-Alamosa). It authorizes both counties and municipalities "to levy, collect, and enforce a special sales tax on retail marijuana and retail marijuana products" if a set of criteria is met. The upshot is that a county can only levy such a tax on retail marijuana sales in municipal boundaries if that city doesn't already have its own special sales tax. The county tax would be in place until the city gains voter approval for its own municipal version. If that happens, the county tax is invalid unless the city and county enter an intergovernmental agreement that spells out how the revenue will be shared.

Wasting no time, Pueblo County entered into such an agreement with the city of Pueblo in March, saying that the county will collect the tax but the city will get 85 percent of revenue from taxes collected within city limits. The county entered a similar agreement with Pueblo West providing for a 50-50 split of revenue from taxes collected in the metro district. Those agreements pertain to revenue that comes in after their signing.

The new law, and the intergovernmental agreements put in place, means that the projects slated to be funded by marijuana tax cash in Pueblo will move ahead as planned. And that's good news for kids waiting for a new basketball court to be constructed, sheriff's deputies expecting new body cameras and marijuana researchers waiting on funding for CSU-Pueblo's new Institute of Cannabis Research, among others.

What it means for Adams County that the Colorado Supreme Court decided to pass up the case is yet unclear, since the county hasn't refunded the tax revenue or entered into any agreements with any of the cities. The Adams County Board of Commissioners is set to discuss the matter on Tuesday, June 27, after the Indy's press time.


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