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.”
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.