Colorado’s Marijuana Tax Revenue: Smoke, Mirrors, Not Enough Money

When Colorado legalized marijuana, there was rosy talk of $33.5 million in tax revenues during the first six months. The reality has turned out to be $12 million. Tax attorney Rob Wood discusses the situation, also the subject of his Forbes article “$21.5 Million In Marijuana Taxes Just Went Up In Smoke.”

Rob Wood

Rob Wood

As Wood points out, not everyone is purchasing legal marijuana, subject to various Colorado taxes that add up to 27.9%. Wood suggests that the tax projections made by Colorado are a little better than one might get using a Ouija board, but not much better. Wood notes a suggestion that only 60% of Colorado purchases will be through legal distributors.

A larger question has to do with the federal law classifying marijuana as a controlled substance regardless of any state law permitting marijuana use. Filing a federal tax return would be the equivalent of admitting to participating in an activity illegal under federal law. Wood says that the mismatch between state and federal law is a serious issue. Businesses selling medical marijuana in California, for example, could not deduct business expenses.

Wood says that many marijuana businesses feel targeted. Banking and credit card use is also a problem for them.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.

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