In Missouri, adult-use marijuana consumers could see a significant rise in prices due to a legal battle over “stacking” sales taxes.

Two court cases, involving marijuana dispensaries Robust Missouri 3 LLC and Vertical Enterprises, are set to determine whether Missouri municipalities and counties can stack their own 3% taxes on top of the state’s 6% excise tax for recreational marijuana.

The debate over the imposition of sales taxes on marijuana has been argued since the implementation of recreational marijuana sales in February 2023.

Missouri’s Constitution dictates that adult use marijuana sales be taxed at 6%, as opposed to a tax of 4% for medical marijuana purchases.

The language of the Missouri Constitution reads, “Pursuant to Article III, Section 49 of this Constitution, the 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 subdivision.  The tax authorized by this paragraph shall be in addition to any and all other tangible personal property retail sales taxes allowed by law, except that no ordinance or order imposing a tangible personal property retail sales tax under the provisions of this paragraph shall be effective unless the governing body of the political subdivision submits to the voters of the political subdivision, at a municipal, county or state general, primary or special election, a proposal to authorize the governing body of the political subdivision to impose a tax.  Any additional local retail sales tax shall be collected pursuant to general laws for the collection of local sales taxes… Except as authorized in this Article, no additional taxes shall be imposed on the sale of marijuana.”

The Constitution also defines the term local government.

“‘Local government’ means, in the case of an incorporated area, a village, town, or city and, in the case of an unincorporated area, a county.”

A recent decision by a St. Louis court has created a potential pitfall for operators who have elected not to implement the stacked taxes, deeming them unconstitutional.

In some localities, both the city and county have implemented sales tax, raising the tax from 9% to 12% for recreational purchases.

The core issue lies in the interpretation of Amendment 3, passed in November 2022, which legalized recreational marijuana. While the amendment does permit local governments to implement a sales tax of up to 3% on marijuana products, the interpretation of the language has sparked controversy over whether these taxes by cities and counties can be cumulative.

Robust operates the Fell State dispensary in Florissant in St. Louis County. Both the city of Florissant and St. Louis County voted to impose additional 3% sales taxes. As a result the county  has pushed the overall tax rate on cannabis products at Robust’s dispensary to 12%.

Robust challenged the legality of stacking sales taxes, arguing that local governments were intended to impose a combined maximum of 3%. However, St. Louis County Circuit Judge Brian May ruled against Robust Missouri, stating that both taxes are valid.

In his ruling, Judge May emphasized that the law should be interpreted “as a whole and not in isolated parts,” asserting that it intended for local governments to “protect public health.”

“If [Robust’s] interpretation were accepted, then a municipality or city would essentially be given carte blanche to ignore any county ordinance or regulation, including those related to public health and safety wholly unrelated to the taxing issue,” he wrote.

Robust Missouri has since appealed the decision.

May’s ruling potentially sets a precedent that could lead to widespread implementation of stacked taxes across the state.

However, not all operators have been collecting the potentially applicable additional taxes due to the ongoing legal ambiguities. These businesses could face significant financial strain if required to retroactively cover the tax discrepancies out of pocket.

“Since October, Missouri cannabis customers have been paying roughly $3 million more each month than what the Missouri Constitution requires,” said Andrew Mullins, MoCannTrade Executive Director. “We know from other states that when legal marijuana is taxed unnecessarily high, it only helps the illicit market, which deprives Missouri veterans and substance abuse programs of needed revenue. As an industry, we are proud to stand up for these customers and have already filed our notice of appeal, so that once and for all Missouri counties are prevented from overcharging Missouri cannabis consumers.”

MoCannTrade has been active in supporting Robust and advocating for the limitation of additional sales tax.

Adding to the complexity, any new sales tax proposals must still be placed on the ballot and receive voter approval before being enacted. This democratic requirement adds a layer of uncertainty and time before any new tax rates take effect.

While Robust has already filed an appeal, Vertical’s case has yet to be heard.

In Buchanan County, Vertical Enterprises, the first in the state to file suit, is still challenging the legality of stacked taxes.

Vertical is challenging Buchanan County’s attempt to impose a 3% sales tax on top of the city of St. Joseph’s own 3% levy. Vertical’s CEO, Christopher McHugh, contends that this practice violates the Missouri Constitution’s definition of a “local government,” which, he argues, permits only one local authority to impose the 3% tax.

The company argues that the imposition of both city and county taxes is unconstitutional under Missouri law, which could lead to conflicting court decisions. The hearing for this case is scheduled for Thursday, May 16, in the Circuit Court of Buchanan County.

Meanwhile,

McHugh explained his position to Greenway previously, “It seems very clear to us that in the constitution, only the local government can collect this tax. Local government is defined to be a city, unless you’re in an unincorporated area. We’re in a city. We’re in St. Joe. So St. Joe has enacted that 3% tax. They passed it. We’re happy with that. They give us a lot of services. They probably deserve that. But Buchanan County is trying to do the same thing. They’re not allowed to do that under the Constitution. They don’t give us any services. We’re not in the county. So it’s just silly, it’s greedy, and it’s not allowed.”

Vertical Enterprises has refused to collect Buchanan County’s additional tax from its customers.

The outcome of these legal battles could have profound implications for both the marijuana industry and consumers in Missouri.

If courts rule in favor of allowing tax stacking, marijuana products could become significantly more expensive, potentially bolstering the illicit market, which would undermine the regulated market’s benefits, including funding for veterans and substance abuse programs.

As these legal proceedings unfold, both marijuana operators and consumers are advised to stay informed about the developments, which will undoubtedly shape the economic landscape of legal marijuana in Missouri.

As these court cases progress, Missouri’s cannabis consumers wait in anticipation of how the decisions will impact their wallets. Will municipalities and counties continue to stack sales taxes, or will the courts rule to protect dispensaries and consumers from rising costs?

For now, the question remains: Is weed about to get more expensive in Missouri dispensaries?

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