Pueblo City Council considers slashing excise taxes on retail marijuana for 3 years

Marijuana excise tax revenue collected by the city of Pueblo peaked in 2021 and has fallen sharply ever since.

Nearly $800,000 was collected in 2021 but that number fell below $200,000 in 2022 and likely in 2023 as well.

The city of Pueblo collects an 8% excise tax on retail marijuana, but city council is going to consider eliminating marijuana excise taxes for the next three years on Tuesday evening.

Advocates say the move could help struggling cannabis growers within the city, while critics say the city should consider the significance of losing out on the tax revenue.

How excise taxes work

Excise taxes are different from the sales taxes consumers pay when they purchase items. These excise taxes are collected on retail marijuana grown in the city before it’s sold to consumers.

Pueblo can collect up to 15% in excise taxes, while counties in Colorado can collect up to 5%. The Chieftain has previously reported that Pueblo County currently collects the maximum 5%.

While Pueblo’s excise tax is just over half of the maximum allowed by state law, it is one of the highest rates in Colorado. The majority of municipalities that collect marijuana excise taxes do so at a 5% rate, according to data from the Colorado Municipal League current through April 2022.

The state of Colorado also collects a 15% excise tax on retail marijuana as well as a 15% state sales tax.

In November 2015, Pueblo voters approved an 8% excise tax on top of the 4.3% city sales tax first approved in 2010. The ordinance language allows the excise tax to be changed without voter approval, as long as the rate does not go over 15%.

What happened at the most recent council meeting

This ordinance to reduce excise taxes for three years was one of the last introduced by Vicente Martinez Ortega, the District 4 councilor who did not win another term in November.

The item was pulled from the first reading of the consent agenda during the last council meeting on Dec. 11 by Councilor Regina Maestri.

Maestri said that marijuana tax revenue “has become a source of revenue for this community” and that eliminating some of the taxes now would be a “kick in the teeth” to people who first supported marijuana legalization for the case of increased tax revenue.

She also said that the city should be careful with its finances and “shouldn’t be taking any revenue off the books right now,” especially since the city has used over $10 million from the fund balance for the latest city budget.

City Councilor Dennis Flores acknowledged that the marijuana industry in Colorado has been struggling, especially as more states start to legalize cannabis.

Flores first said that he would consider an amendment to the ordinance to reduce the rate of excise taxes on marijuana growers within city limits to help the businesses struggling at the moment, but after hearing about the drastic drop in excise tax collected, said the city should drop the excise tax in an effort to try to save the businesses.

City Clerk Marisa Stoller confirmed to council that at least two marijuana grows in the city have shut down in 2023.

Council president Heather Graham, who is incumbent mayor Nick Gradisar’s opponent in the upcoming mayoral runoff election, said the city should consider what approximately half a million dollars in lost revenue would mean over the course of three years.

“It's something that we shouldn't quit collecting because the marijuana industry isn't what it was all cracked up to be,” Graham said.

Martinez Ortega said that the excise tax is “outdated” from when marijuana was first legalized.

“To make us competitive and keep jobs and recruit new jobs, we need to update this excise tax, which is between the grow and the dispensary,” Martinez Ortega said.

Maestri was the only councilor to vote against the item on first reading.

This isn’t the first time council has talked about marijuana excise taxes

Dr. Malik Hasan is a local doctor and businessman who runs the NuVue dispensaries in the Pueblo area.

Hasan came to speak at a city council work session in May, which got off to a rocky start when he insulted Graham and was reluctant to abide by the 15-minute time slot allocated for him to speak.

After eight minutes of back-and-forth — Hasan referred to the city councilors as “nincompoops” at one point — Hasan told city council that the high excise taxes are hurting local businesses and noted that other large cities in Colorado don’t collect them.

Hasan also attempted to refer a ballot question effectively eliminating the city’s marijuana excise taxes on the ballot in summer 2022, but did not collect enough signatures.

Anna Lynn Winfrey covers politics for the Pueblo Chieftain. She can be reached at awinfrey@gannett.com. Please support local news at subscribe.chieftain.com.

This article originally appeared on The Pueblo Chieftain: Why Pueblo City Council may slash marijuana excise taxes