Marijuana And Money

In their effort to forge laws governing marijuana sales in Colorado, legislators are debating about the amount of taxes that should be associated with the sale. Colorado House of Representatives wants a 15% excise tax and a 10 or 15% tax on all sales in addition to the 2.9% state sales tax and any local taxes. Other cost relayed to the consumer will include the high licensing and application fees associated with starting a marijuana distribution center. Other legislative efforts that will continue to drive up costs are the rule governing that 70% of all marijuana sold must be grown by the distributor and no more than 30% may be furnished to another distributor. Also the legislators are considering limiting the amount of marijuana that can be sold and limiting the number of distributors state-wide which could create a shortage of legally sold marijuana. Shortages of supply would tend to drive the cost to consumers higher.

With taxes on sold marijuana approaching 30 to 35% it will be difficult to keep costs low enough to discourage a black market for marijuana. Brick and mortar stores have the added cost of a building, with all of its associated cost such as mortgage or rent, electricity, water, insurance and wages paid to a staff. Citizens of Colorado are allowed to grow their own marijuana and the profits of black market sales will be just too tempting for some to pass up, especially if the legal market is unable to meet demand.

Another problem facing marijuana distributors in Colorado is the continued prohibition of marijuana at the federal level. Since marijuana is still illegal by US law, it is difficult to find banks and insurance companies to do business with the distributors, forcing them into a cash only business with elaborate security systems. I’m sure the Federal government would not allow armed security in a business selling marijuana according to the Gun Control Act. This leads to increased security risks associated with robberies and burglaries and makes it difficult to obtain financing for startup and operating expenses. In addition the Federal Government has a long history of circumventing the will of the people by raiding marijuana distributors and confiscating their assets and property and incarcerating the owners.

All of these things combined make black market marijuana more appealing and profitable while making legal marijuana more expensive and easier targets for the Feds.

Randy Johnson