Questions remain about marijuana sales tax as election nears

The constitutional amendment legalizing recreational marijuana for adult use, which voters passed in November, authorized the state to impose a 6% sales tax on such products and local governments to impose taxes of no more than 3% with voter approval. If both the Columbia and Boone County taxes are approved and stackable, the result would be a 12% tax on recreational marijuana.

Boone County Presiding Commissioner Kip Kendrick said he believes language in what is now Article XIV, Section 2, of the state constitution would prevent the Missouri Department of Revenue from stacking the taxes.

“We’ll move forward operating under the assumption that the way Constitutional Amendment 3 reads that ... (the taxes) will not be stacked, and we will not receive funding for sales within the city of Columbia ... for the time being,” he said.

Kendrick has estimated the county tax would generate $40,000 to $1 million per year, depending on whether the city and county taxes are stackable.

The Missouri Department of Revenue issued two conflicting letters on the matter in February. It said in a Feb. 1 email to local government leaders that the taxes cannot be stacked. On Feb. 10, however, it sent another letter reversing the earlier opinion after “engaging in public and private stakeholder feedback.”

“Going forward, the Department will not advise municipalities or counties regarding the possibility of stacking,” the letter stated, citing the amendment’s “ambiguous” language.

Dan Viets, a Columbia attorney who co-wrote the constitutional amendment, said its provisions make it clear the city and county taxes can’t be stacked.

Viets specifically pointed to Section 2, Subsection 6 of Article XIV, which allows local governments to impose an additional sales tax “not to exceed three percent on ... retail sales of adult use marijuana.”

However, Viets acknowledges that the amendment is “vague” in its wording.

The Missouri Department of Revenue is refusing to take sides, but outlined the two opposing views regarding stacking the taxes in its Feb. 10 letter.

“One may argue that stacking is improper due to the definition of ‘local government’ in Article XIV, Section 2.2,” the letter said.

“There, ‘(l)ocal government’ means, in the case of an incorporated area, a village, town, or city and, in the case of an unincorporated area, a county.’ Because this provision distinguishes between incorporated and unincorporated areas, a local government cannot be both; so, there can be only one taxing entity.”

Alternatively, the letter suggested, there is validity to stacking the taxes because “the taxation portion of Article XIV does not have single-entity restrictions. Section 2.6(5) states in part, ‘[T]he governing body of any local government is authorized to impose, by ordinance or order, an additional sales tax in an amount not to exceed three percent on all tangible personal property retail sales of adult use marijuana sold in such political division.’”

The revenue department said the courts will likely be responsible for settling the debate.

“Like the existence of adult use marijuana itself, the people decide if they want sales taxes on adult use marijuana sales. If necessary, courts are tasked with interpreting constitutional language. The Department will not supersede ... the meaning of constitutional verbiage when there is not a definite answer.”

Kendrick said a legal battle is “likely” and predicted Missourians will have no answer on the stackability of the taxes before the municipal election.

“I think it’s been made very clear by the Department of Revenue that the question will not be answered prior to the election,” Kendrick said. “I would think that it will go through a legal process beyond the Department of Revenue’s initial decision.”

If voters pass both taxes before a decision is made, Kendrick said the county would collect revenue from both taxes but set aside revenue from the city tax until the legal issues are worked out.