Pubdate: Sun, 20 Jul 2014
Source: Denver Post (CO)
Copyright: 2014 The Denver Post Corp
Contact:  http://www.denverpost.com/
Details: http://www.mapinc.org/media/122
Author: Vincent Carroll
Page: 3D

WHY POT TAX REVENUE IS LOW

Did Coloradans legalize the retail sale of marijuana mainly to serve 
tourists and visitors?

You begin to wonder after reading a state study on "Market Size and 
Demand for Marijuana in Colorado" and scouring the latest 
tax-collection reports.

It's not just that 90 percent of retail sales of marijuana in 
mountain resorts so far have been to out-of-staters, as well as 
almost half of all such retail sales in the state and 44 percent of 
those sales in the Denver metro area. Many of Colorado's heaviest 
marijuana users, meanwhile, appear to be quite happy sticking with 
medical pot, which they were able to obtain long before Amendment 64.

Medical pot is cheaper (7.62 percent sales tax in Denver as opposed 
to 21.12 percent at retail outlets) and more widely available. And 
while it requires a doctor's permission, that has been notoriously 
easy to secure.

Heavy users-those who consume marijuana every day- "drive almost 70 
percent of total marijuana demand," the Department of Revenue study 
says. No wonder medical marijuana sales dwarfed retail sales in the 
first four months of this year-$133 million vs. $70 million-while tax 
revenues from retail pot are lagging far behind projections.

Ninety-four percent of medical pot users cite "severe pain" as their 
condition. You too might discover severe pain requiring treatment if 
your marijuana habit was costing so much.

"It was initially thought that medical marijuana patients would 
purchase marijuana in the retail market, but it is increasingly clear 
that this conversion will not occur as long as the large price 
differential persists and as long as retail marijuana is not 
available in as many jurisdictions as medical marijuana," the state 
study concludes.

But if medical marijuana patients aren't converting in Denver, where 
retail pot is readily available, why should we suppose they will 
convert anywhere else given more retail shops?

Price and availability may not be the only reasons for medical 
marijuana's unexpected resilience, either. The fact that medical and 
retail pot establishments are allowed to co-locate on the same 
premises-in apparent violation of Amendment 64- no doubt has propped 
up medical sales, too.

It's all but forgotten now, but the amendment passed in 2012 said, 
"Nothing in this section shall be construed to permit any medical 
marijuana center ... to operate on the same premises as a retail 
marijuana store."

And yet thanks to the legislature's decision to flout the 
constitution, co-location is actually the norm.

The governor's task force on Amendment 64 last year recommended 
"complete" physical separation between the two types of stores, but 
lawmakers approved rules saying medical and retail shops could share 
the same space so long as there were no sales of medical marijuana to 
patients under 21.

The result in Denver, according to the city's executive director of 
marijuana policy, Ashley Kilroy, is that 85 of the city's 90 retail 
stores sell both medical and retail pot, and just 21 have separate 
entrances and facilities.

Given this state of affairs, dreams of a tax bonanza from retail 
marijuana may have to be put on hold. Heavy users drive marijuana 
sales and they have a strong incentive to use cheaper medical 
marijuana. And marijuana store owners have no incentive to convert 
solely to retail sales given the convenience of operating both types 
of outlets.

But at least we've made the tourists happy with our new retail shops.
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MAP posted-by: Jay Bergstrom