by Michael Dohr
One of the many challenges the General Assembly faced during the 2013 session was implementing Amendment 64. The General Assembly started with the recommendations developed by the Governor’s Amendment 64 implementation task force and the existing Colorado medical marijuana framework. That led to three bills implementing Amendment 64 – House Bills 1317 and 1318 and Senate Bill 283. One bill addressed the regulatory framework, a second addressed the taxation issues, and the third addressed miscellaneous issues recommended by the Governor’s task force.
House Bill 1317 addressed the regulatory framework of retail marijuana enforcement. The medical marijuana enforcement division in the department of revenue was changed to the marijuana enforcement division (division) and now regulates both medical marijuana and retail marijuana. The division is supported by application and licensing fees; sales, excise, and special marijuana sales taxes from retail and medical marijuana; and any necessary supplementary general fund appropriations. The division may set the amounts of the fees for the various types of licenses it issues.
An existing medical marijuana licensee or medical marijuana applicant has the first opportunity to apply for a retail marijuana establishment license. A current medical marijuana business owner may convert the operation to a retail marijuana business or retain the medical marijuana business and add a retail marijuana business. During the first nine months of operation, a retail marijuana establishment must sell only the marijuana it cultivates, subject to the existing medical marijuana requirements. On and after September 1, 2014, this vertical integration requirement is removed and independent grow operations may be licensed.
Individuals who are not currently licensed for medical marijuana or an applicant for a medical marijuana license must wait until July 1, 2014, to apply for a retail marijuana license. Starting January 1, 2014, those persons may submit notice of intent to apply, and they may apply beginning July 1, 2014. Persons who have submitted notices of intent will have their applications processed first.
The following businesses must be licensed to operate a retail marijuana establishment: retail marijuana stores, retail marijuana products manufacturers, retail marijuana cultivation facilities, and retail marijuana testing facilities. The state licensing authority must act on applications within 45 days to 90 days after receipt.
The General Assembly placed limits on persons who may be licensees based on previous criminal behavior and other factors. A license applicant must undergo a background check. All officers, managers, and employees of a retail marijuana business must be residents of Colorado, and all owners must be residents of Colorado for at least two years prior to applying for licensure.
The General Assembly also imposed some unique requirements on retail marijuana stores. A retail marijuana store may sell only one-fourth of an ounce of marijuana to a nonresident during a single transaction. A retail marijuana store may not sell any retail marijuana product that contains nicotine or alcohol. And a retail marijuana store must place each sold item in a sealed nontransparent container at the point of sale.
House Bill 1318 addressed the taxation issues surrounding the implementation of retail marijuana. Subject to voter approval at the statewide election in November 2013, there will be a 10% sales tax and a 15% excise tax on the sale of retail marijuana. The sales tax is in addition to the 2.9% state sales tax and any local government sales tax. The taxes do not apply to medical marijuana. In future years, the General Assembly may lower the rate below the respective 10% and 15% tax rates and then may subsequently raise the rate to 15% for either the sales or excise tax or both without further voter approval, so long as the rate does not go above 15%.
15% of the marijuana sales tax will be distributed to each local government that is home to one or more retail marijuana stores. Each local government’s share is apportioned according to the percentage of retail marijuana sales tax revenues collected in the local jurisdiction compared to the total retail marijuana sales tax collections in the state. The remaining revenues are deposited in the marijuana cash fund for regulatory enforcement and other purposes determined by the General Assembly. As required by Amendment 64, the first $40 million received and collected in excise tax revenue is transferred to the public school capital construction assistance fund. Any amount remaining after the transfer is deposited in the marijuana cash fund.
The regulatory and tax structure dominated the Amendment 64 implementation debate, but there were also a number of important odds and ends that were also adopted in Senate Bill 283.
The governor must designate an appropriate state agency to:
- Create a list of banned substances in marijuana cultivation;
- Work with a private organization to develop good cultivation and handling practices;
- Work with a private organization to develop good laboratory practices; and
- Establish an educational oversight committee for marijuana issues.
The Division of Criminal Justice in the Department of Public Safety must undertake or contract for a scientific study of law enforcement activities related to retail marijuana implementation. The Department of Public Health and Environment must monitor the emerging science and medical information regarding marijuana through a panel of health care experts. The panel must report its findings every two years.
The license of a child care center, children’s resident camp, cradle house, day treatment center, family child care home, foster care home, guest child care facility, homeless youth shelter, medical foster care, neighborhood youth organization, public services short-term child care facility, residential child care facility, secure residential treatment center, or specialized group facilities may be denied, suspended, or revoked if retail marijuana is consumed or cultivated onsite. A community residential home or regional center may not permit cultivation, use, or consumption of marijuana.
Federal law prohibits certain business expenses related to the sale of marijuana as tax deductions, but Colorado permits those deductions to be used to calculate the state tax owed.
Marijuana was added to the indoor smoking ban and the ban on tobacco products on school property.
The General Assembly declared that it is public policy of the state that a contract related to a marijuana business is not void or voidable as against public policy.