Missourians backed most proposals to apply a local sales tax to recreational marijuana, a move that governments predict will provide a modest funding boost.
The tax passed in dozens of cities and counties in the St. Louis region and failed in just a few.
But the passage of countywide marijuana taxes will likely set up a court battle, as backers of the 2022 state constitutional amendment that legalized recreational cannabis contend that it can only be collected at dispensaries in unincorporated areas or individual cities.
Voters in St. Louis, as well as in St. Louis, St. Charles, Lincoln, Franklin and Phelps counties backed municipal and county ballot items that would place a 3% tax on recreational marijuana purchased at dispensaries. Currently, cannabis consumers pay a 6% state tax — but the 2022 amendment allowed for local taxes if a majority of voters in that jurisdiction approved them.
St. Charles County Executive Steve Ehlmann said he’s not surprised that the taxes passed.
“People were already smoking marijuana,” said Ehlmann, referring to what happened before marijuana was legalized last year. “And unlike you and I, when we drink our Budweiser or Jack Daniels and pay a tax on it, they are not paying. So if you think that's not right, then I think you should vote to go ahead and tax marijuana and have a tax the same way we do on wine, liquor, beer and whatever. Yeah, sounds to me like the people agreed with that.”
Each dispensary is expected to generate about $100,000 in sales tax annually.
Many of the tax proposals didn’t have opposition campaigns. For years, backers of legalized marijuana often contended that bringing the product out of the black market could generate a lot of money for governments. And the tax is still lower than that of Illinois, which legalized recreational marijuana several years ago.
Still, the countywide taxes that passed could be the source of legal fights for the next few months.
County officials have said they can collect the tax all over, while opponents disagree. The Missouri Department of Revenue has been neutral on the issue.
“A county tax is a county tax,” Ehlmann said. “And I'm sure if somebody challenged it, I'm quite sure that the courts are going to agree with my attorney and myself that the section that deals with taxation makes it quite clear that it is a countywide tax.”
The answer to that question could have a major financial impact for counties and dispensaries. For instance: St. Louis County estimates that a countywide tax at all dispensaries could collect around $3 million a year. That amount will drop dramatically if it can only be collected in unincorporated areas.
And if counties can collect taxes at dispensaries within municipalities, consumers there would have to pay a 3% county tax and a 3% city tax along with the 6% state tax. That could give dispensaries in places like St. Louis or unincorporated areas an advantage in terms of pricing.
“If you tax it too highly, then all you're doing is feeding the illicit market,” said John Payne, the campaign manager for the successful 2022 effort to legalize marijuana in Missouri. “And also, you're creating kind of inequitable situations between different dispensaries where one has a substantially higher tax rate.”
Payne and county leaders expect the issue to be decided in court. In the meantime, counties and municipalities can start collecting the taxes in early October.
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