Think of it as a back-to-school sales tax break, but for stoners. Colorado's unusual tax law is forcing the state to suspend taxes on recreational marijuana for one day—Sept. 16—during which a 10% sales tax and 15% excise tax won't be collected. The sales-tax break would shave $20 off the price of a mid-grade ounce of pot in the Denver area, where ounces this summer have sold for about $200 before tax. "At first I was in disbelief," says the owner of a dispensary in the Denver suburb of Northglenn. "Once our lawyer said no, we really are doing this, we started getting ready. We're thinking there will be huge crowds." Colorado's Taxpayer's Bill of Rights requires voter approval for new taxes. In 2013, a year after legalizing recreational pot, voters approved the 25% taxes.
But the law requires that any new taxes be waived and refunded if overall state collections exceed projections given to voters when they approved the new taxes. In this case, the pot taxes were projected to raise $70 million in 2014. They actually raised $58 million, but because overall tax collections that year exceeded projections, Colorado must ask voters for permission to keep the money. And to comply with the requirement that the taxes revert to zero, lawmakers settled on a short one-day tax waiver on Sept. 16—one day after the state's books for the previous fiscal year are made final. Officials say the day could cost the state $3 million to $4 million. Marijuana won't be completely tax-free that day: A regular 2.9% sales tax still applies, as do medical marijuana taxes and local pot taxes. Colorado voters will decide in November whether to keep the pot taxes.