New marijuana taxes debated in Lakewood

City Council takes up the issue of a special sales tax for pot

Bob Wooley
bwooley@coloradocommunitymedia.com
Posted 5/12/21

Lakewood currently taxes retail marijuana at a lower rate than most surrounding cities. But that may be about to change. In the May 6 Lakewood City Council meeting, Erin Nordmann, Lakewood’s …

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New marijuana taxes debated in Lakewood

City Council takes up the issue of a special sales tax for pot

Posted

Lakewood currently taxes retail marijuana at a lower rate than most surrounding cities. But that may be about to change.

In the May 6 Lakewood City Council meeting, Erin Nordmann, Lakewood’s Revenue Manager, gave a presentation pointing out the differences in the way Lakewood taxes pot compared to other metro cities. The presentation also laid out options that would bring the city’s marijuana taxes in line with its neighbors.

Lakewood’s current base sales tax rate is 3%. Combined with city, county and district taxes of 16.6%, right now, the total tax rate on marijuana inside the city is 19.6%.

However, some surrounding cities add another tax, known as a “special sales tax,” to pot purchases. That adds anywhere from 3% to 7% to the cost of getting high. But Lakewood has no “special sales tax.”

So far, five medical marijuana vendors in Lakewood have applied and been approved to sell recreational pot since the passage of city Ballot Question 2B last fall. There are five other medical marijuana sellers that would be eligible to apply for the retail recreational license if they chose.

If Lakewood adopted a special city marijuana tax in the 3% -7% range, annual sales tax revenue would increase by between $500,000 to $1.2 million.

Council member Ramey Johnson, Ward 5, a vocal opponent of recreational pot in Lakewood, said the city should follow Commerce City’s lead and impose a special sales tax of 7%.

Mike Bieda, Ward 3, said the special tax had been discussed in the Budget and Audit Committee, and they had recommended a 5% special sales tax on retail marijuana. Bieda said without the recommendation of the committee, he himself had been in favor of a 7% tax. 

Council Member Anita Springsteen, Ward 3, warned that making the tax too high could drive customers out of the city to buy their pot, resulting in less tax revenue for Lakewood. Charlie Able, who represents Ward 1, said he would find a 5% or 7% tax acceptable.

Karen Harrison, Ward 5, said in a recent ZOOM meeting, her constituents made it clear they didn’t favor taxing retail marijuana at higher rates than any other product, and therefore she was okay with a 5% special tax, but wouldn’t be inclined to go higher. Dana Gutwein, Ward 5, also topped out at 5% and wants to see the money tied to community needs, citing safety, homelessness and sustainability as good uses for increased tax revenue.

Johnson, on her second-round comment, said it was important for council to see data on costs associated with marijuana DUI cases, hospital visits, city and police services since retail sales were legalized, before making a final decision on the amount of a potential special sales tax. 

A tentative first reading of a ballot question to allow a special sales tax to retail marijuana purchases is scheduled for June 14. The second reading and hearing is scheduled for June 28.

Council members also discussed adding an excise tax on cultivation of marijuana. Marijuana grow houses were legalized with the passing of Ballot Question 2B last November.

An excise tax would be put on the first sale or transfer of marijuana from a grow operation to a marijuana store or a facility that manufactures marijuana products (edibles, etc.).

Lakewood currently has no excise tax on cultivation. Adding the tax would be a separate question on the ballot. Council reached consensus during the meeting to move forward with a ballot question to add a 5% excise tax on grow houses, although they could still change their minds, votes or both upon the second reading.

Another hot topic the board discussed dealt with marijuana delivery. Lakewood does not currently allow home delivery of marijuana. But six other nearby cities do.

According to Nordmann, the marijuana would be taxed at the point of delivery. So, the city would still benefit even if it was purchased in Denver and delivered to a house in Lakewood.

Council could approve this question without sending it to Jeffco voters. Holly Bjorklund, Lakewood CFO, reminded council that Colorado had passed a law allowing delivery in any jurisdiction. The council reached a consensus to draft an ordinance for allowing delivery, pending formal approval of the ordinance to be taken up June 14.

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