- Ambiguities about sales taxes in the constitutional amendment legalizing recreational marijuana have led to disputes between counties and cities.
- In some Missouri cities, recreational marijuana customers face up to 20% in state and local sales taxes.
- Dispensaries are taking legal action against the stacking of taxes, citing potential “irreparable harm.”
A little sales tax on the buds or gummies you buy at the neighborhood cannabis dispensary is one thing.
But another tax? And another?
Various state and local sales taxes lumped onto your recreational marijuana purchase can add upwards of 20% to the cost of legalized Missouri weed.
The state cannabis trade association, which is backing dispensaries’ legal action over the stacked taxes, calls the compiling marijuana surcharges an “unconstitutional money grab” by city councils and county commissions.
“Today’s lawsuit should eventually put an end to Missouri adult use marijuana customers having to pay stacked local taxes, which violate the Missouri Constitution and the will of the voters,” said Andrew Mullins, the executive director of MoCann Trade, when lawsuits were filed in mid-October. “We are proud to work with our industry partners to stand up for Missouri cannabis customers against this unconstitutional money grab.”
In November 2022, Missourians approved legalizing recreational marijuana. Since then, the state has grappled with regulating a new industry as cities, counties and the state tussle with one another over how much each can get from dispensary sales.
Since recreational sales began in February, Missourians have spent an average of $92 million a month on weed. That means the 6% state sales tax from recreational sales sends about $4 million a month to Jefferson City, less than one-half percent of the state’s total monthly revenue in October.
Cities and counties can pass their own taxes, adding up to an additional 3% in local taxes to a sale of recreational marijuana under terms now enshrined in the state constitution. But as counties and cities pass taxes of their own, exactly how they can be applied remains unclear.
Weed taxes upon weed taxes
So far, 83 of the state’s 114 counties have passed local marijuana sales taxes, according to the Missouri Department of Revenue. Some taxes went into effect Oct. 1, while others will take effect Jan. 1.
Of those counties, 33 don’t currently have any dispensaries, a sign of how eager county officials are to secure a piece of the marijuana pie when dispensaries open.
At least 164 cities across the state have passed local sales taxes for marijuana sales. At least 81 of those cities have no dispensary within their city limits.
The constitutional amendment lays out how counties and cities can work together to tax cannabis sales. But some counties are interpreting the constitution differently than others.
The debate roils around whether local officials have to split the weed tax pie, or just ask for another pie. For now, cities and counties are uncertain whether they can add a combined total of 3% or whether they can stack their sales taxes on top of one another, which would effectively double the local sales tax consumers pay.
Local tax rates don’t apply to sales of medical marijuana, which are fixed at 4%.
But for recreational sales, the taxes mount up. So a pack of edibles that’s listed for $100 in Kansas City goes to $106 with the state tax, then to $109 when the city tax is added and $112 when the county stacks its charge on top. That’s without the typical sales taxes that still apply. With state sales taxes, that brings the total to just over $116, then to nearly $119.50 for Kansas City sales taxes, plus another dollar or two for county sales taxes and other taxing districts like the Kansas City Zoo or the streetcar.
The language in the constitution allows a “local government” to pass a sales tax for recreational sales. Most counties interpret that to mean that county taxes would only apply in unincorporated areas.
“We know that the drafters of the amendment meant for it not to be stackable,” Boone County Presiding Commissioner Kip Kendrick told the Missouri Independent.
But some counties didn’t see it that way.
Lawsuits over marijuana tax stacking
The marijuana taxes come on top of general state and local sales taxes, which can vary across the state. A dispensary in Florissant, in St. Louis County, sued after the county said it would stack its tax. That would mean all state, city and county sales taxes would add up to 14.988%.
The county expects to see around $3 million in revenue if it can stack its tax on top of the city rate.
The dispensary argues in the lawsuit that a stacked tax would cause “irreparable harm” and could result in the loss of customer relationships.
Another dispensary in St. Joseph, in Buchanan County, is suing over the same issue. Guidance from the Department of Revenue, the agency that collects marijuana sales tax revenue each month, hasn’t cleared up much.
Initially, the agency told local governments and dispensaries in February that the language did not allow for stacking of city and county sales tax rates, according to lawsuits filed.
Weeks later, the department bowed out of the conversation, saying that the constitution is vague.
“Going forward, the Department will not advise municipalities or counties regarding the possibility of stacking,” the department wrote in guidance included by lawyers in the St. Louis County lawsuit. The constitutional amendment, the department said, “is ambiguous.”
Now, the issue is left up to district courts. Until a decision is made, dispensaries will continue paying both county and city rates, said Jack Cardetti, a spokesman for the trade association.
It’s unclear how reimbursements may work if courts rule that stacking is unconstitutional, since many counties have already started collecting payouts.
“If the lawsuit is successful,” Cardetti said, “it would be our hope that any order would prevent DOR from continuing to collect the unconstitutional tax across Missouri, thus saving Missouri customers approximately $3 million per month.”
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