Market rate to set marijuana prices for excise tax

By: The Associated Press
November 15, 2013 Updated: November 16, 2013 at 8:31 am
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photo - In this Oct. 23, 2013 photo, marijuana is displayed at the River Rock dispensary, in Denver. Colorado regulators are surveying marijuana businesses for pot prices so they can institute an excise tax. (AP Photo/Brennan Linsley)
In this Oct. 23, 2013 photo, marijuana is displayed at the River Rock dispensary, in Denver. Colorado regulators are surveying marijuana businesses for pot prices so they can institute an excise tax. (AP Photo/Brennan Linsley) 

DENVER - Colorado regulators are surveying marijuana businesses for pot prices so they can institute an excise tax approved by voters - but it will take time for the market to reach a level where a wholesale price required to institute the tax can be determined.

The 15 percent tax applies to the wholesale price of recreational marijuana as it moves from grower to seller. The tax goes into effect Jan. 1, when the first recreational pot stores open.

But marijuana businesses at first must grow nearly everything they sell, so initially, wholesale transactions will be transfers within businesses in which no money is exchanged. Businesses are restricted in the number of times they can buy pot grown by another business.

The solution: Determining an average market rate that applies to grower-seller transactions, The Denver Post reported Thursday. But a true wholesale market - and price - won't happen for at least nine months after sales start, the Post reported.

A state questionnaire asks businesses how much marijuana they grew over the past year, how much they sold to other businesses, and at what price.

That approach could produce an inflated price and tax, said Mike Elliott, executive director of the Medical Marijuana Industry Group.

Business-to-business transactions are more expensive than in-house transfers, and basing the excise tax on the former would produce an unfairly high tax rate, he said.

Colorado regulators may also differentiate between different cuts of marijuana. Buds could be given a higher market rate. Trim and leaves used for marijuana-infused products could get a lower rate.

A hearing on tax issues is tentatively set for Dec. 17, said Daria Serna, spokeswoman for the Department of Revenue.

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