Could you pay 6% more in local marijuana tax? It’s unclear days before Missouri election

Voters in more than 100 Missouri cities and counties next week will weigh new taxes on the state’s burgeoning marijuana industry.

So far, there’s been little in the way of organized opposition to the proposed taxes, which provide local governments with a lucrative new revenue stream — particularly important now as pandemic aid from the federal government expires.

But one major debate will persist long after Tuesday’s election: whether cities and counties can simultaneously levy taxes on marijuana.

The constitutional amendment legalizing marijuana for recreational use approved by Missouri voters in November allowed local governments to add up to a 3% tax — but only if voters approve it. That’s on top of regular state and local sales taxes and the state’s 6% recreational marijuana tax.

Originally, that was interpreted to mean that cities could implement the new tax within their borders and counties could do the same in unincorporated areas — but not both. Officials in Jackson, St. Charles and St. Louis counties, though, argue that they should be able to stack the taxes — essentially levying up to 6% extra if ballot measures pass next week.

The dispute will likely end up in front of a judge if both county and city taxes are imposed.

“Ultimately the courts will work this out,” said Jack Cardetti, spokesman for the Missouri Cannabis Trade Association, a group that includes most of the state’s cultivation, manufacturing and dispensary operators.

The question will be relevant across the state, where cities and counties are asking voters to approve new taxes. Locally, voters in Kansas City, Independence and Lee’s Summit will weigh a city marijuana tax of 3%. Residents of Jackson County will be asked about a countywide tax of 3%.

A legal analysis drafted by the state’s marijuana trade association concluded that the constitutional amendment was “extremely clear and unambiguous.”

The amendment grants “the governing body of any local government” the right to impose the 3% tax. The amendment language defines local governments as cities or counties, which the trade association views as a clear distinction.

“From a legal standpoint, it’s an absolute slam dunk,” Cardetti said. “We absolutely oppose double taxation.”

Marijuana sales already face a special state tax in Missouri: 6% for recreational sales and 4% for medical sales. Industry insiders say that’s favorable compared to other states like Illinois, where marijuana taxes can reach as high as 25%.

But if dispensaries begin levying an additional 6% in county and city tax on top of existing sales taxes, it could begin to change consumer behavior.

For one, it could push some recreational users to apply for medical marijuana cards. Medical patients already face lower taxes at dispensaries and would not be subject to the new local taxes.

“I think the bigger risk is that customers in Missouri continue to access it on the illicit market where the product isn’t tested, it’s not regulated,” Cardetti said. “That’s the real risk in driving up taxes that were never, ever contemplated on this issue.”

At the beginning of February, the Missouri Department of Revenue told the Missouri Municipal League and the Missouri Association of Counties that localities cannot “stack” the taxes. That would mean counties could collect the tax only in unincorporated areas.

But the department soon rescinded that guidance after hearing opposition from the Missouri Association of Counties. In its second analysis, the revenue department called the constitutional amendment language “ambiguous,” noting there were two conflicting interpretations.

“If necessary, courts are tasked with interpreting constitutional language,” the revenue department wrote. “The Department will not supersede the decisions of the people on sales tax for adult marijuana nor the meaning of constitutional verbiage when there is not a definitive answer.”

In a statement to The Star, Jackson County spokeswoman Marshanna Smith cited the revenue department’s opinion as justification for the county’s belief that it can collect the tax even in incorporated areas of the county if its ballot initiative passes.

Smith said “this tax will be collected in unincorporated areas and in municipalities within counties, if the ballot measure is passed.”

At stake is potentially millions of dollars in new revenue. In the first month of recreational marijuana legalization, state officials recorded more than $100 million in sales.

“They see a big pile of money that they want a larger share of,” said John Payne, who led the legalization campaign last fall.

Payne said the amendment was written to allow counties to impose the tax, but only at dispensaries in unincorporated areas. That means the vast majority of the new tax revenue will go into city coffers.

“It’s an either or — it’s not a both and,” he said.

In polling during the legalization campaign, organizers learned that extra tax revenues were among the most persuasive arguments for allowing recreational marijuana sales.

Payne believes widespread passage of the ballot initiatives next week will lead many other cities and counties to put the taxes on ballots in future elections.

“I’m certain that anyone that didn’t put it on the ballot for this cycle who sees those revenues coming in other places will probably put it on the ballot for a future election,” he said. “I doubt there’s going to be a whole lot of places where there are dispensaries in the state that don’t ultimately put this on the ballot.”

Marijuana operators don’t appear to be campaigning against taxes.

“It doesn’t affect us tremendously because it’s a tax that is ultimately passed on to the customer,” said Adam Diltz, the chief operations officer for Illicit Gardens.

Illicit Gardens grows and manufactures marijuana products and operates five Kansas City area dispensaries under the brand name From the Earth.

Diltz said he’s in support of the 3% tax, which can help local governments fund a variety of basic services. But he said a 3% tax from the county and a 3% tax from the city would be “a tougher pill to swallow.”

Still, “if they both pass and the jurisdiction we’re in says this is the way it is, we’ll go along with it,” he said.

While extra taxes could push some customers to explore medical cards or the black market, Diltz believes most will go along with the extra cost.

“It’s like when gas prices go up, people still go get gas,” he said. “If the taxes go up, people are still going to buy the product.”