Regulating marijuana businesses is on the new City Council’s agenda for the coming year. City Council took this matter up in the summer of 2020, and voters responded in favor of questions 2A and 2B in the April election. That vote gave City Council the green light to tax and regulate marijuana businesses by adopting new ordinances. City Council wants to hear from residents on how to design these new regulations. This primer offers an overview of details that will help residents provide meaningful input.
How did we get here?
The City started its current process related to marijuana businesses at City Council’s direction on July 13, 2020. Since then, the City Council has received substantial public comment. City staff have also researched the topic heavily, soliciting input from other Colorado communities and understanding best practices and State regulations. Staff also convened a working group of twenty community and industry members in the fall of 2020. The City’s Planning Commission has also discussed the topic thoroughly.
City Council referred questions 2A and 2B to the April 6, 2021 ballot. In the vote, a majority of voters elected to lift the moratorium on marijuana businesses and establish the City’s authority to tax those businesses. Now, the City Council is now empowered to craft and adopt relevant regulations. The City Council held a workshop on this topic on May 3, 2021, where they agreed that the next step is to return to residents to solicit as much public input on this topic as possible in a timely manner.
What type of marijuana businesses could be licensed?
Ballot measure 2B allows the City Council to develop regulations for the full range of marijuana businesses. The City Council’s first step is to consider marijuana sales businesses, commonly referred to as dispensaries or marijuana stores. Other license types, such as cultivations and products manufacturers, would be brought to the public for comment at a later date. Both retail (often called recreational) marijuana and medical marijuana stores are being considered.
Many regulations are already in place at a State level. For example, a licensed marijuana store may sell marijuana to persons over the age of 21 or, in the case of medical stores, to any person holding a valid medical marijuana license. An individual cannot purchase more than 1 ounce of retail marijuana. A store may also sell marijuana concentrates, infused products (edibles), or topical products. A store may only operate between the hours of 8 a.m. – midnight, or as further restricted by the municipality. Any marijuana store that seeks to operate needs to obtain a permit from both the state and the local jurisdiction. The State also protects personal rights for adults older than 21 to grow, possess, and consume limited amounts of marijuana on private property.
How are marijuana sales businesses taxed?
Taxation of marijuana includes sales and use tax and excise tax, both of which are typically a combination of local and states taxes. Sales and use tax is applied to sales in stores, while excise tax is applied to the raw marijuana product transferred from cultivation businesses. These special marijuana taxes are applied in addition to other City, State, and County taxes, so the total rate is higher than the special rate. The taxes collected by marijuana businesses then go to the City, County, and State.
Question 2A established a local sales and use tax rate as well as a local excise tax rate, including baseline rates and authority to increase those rates up to specified limits. The special sales and use tax rate for marijuana and marijuana products must be set at a minimum of 5% but can be raised up to 15%. A 5% special marijuana sales and use tax is near the high end when compared to other communities in the state. A rate of 10% or 15% would be the highest in the state. On excise taxes, question 2A set the minimum for the special excise tax rate at 3%, with authority to increase up to 15%. Excise tax applies to cultivation, so it will be more relevant when the City Council begins considering cultivation businesses.
A full accounting of the sales and use taxes in place for marijuana and marijuana products is as follows. The City of Grand Junction Sales Tax of 3.25% and the Mesa County Sales Tax of 2.37% are applied to marijuana just as it does to any other retail sale. A 15% State Marijuana Sales Tax is also applied; this absorbs the baseline State of Colorado Sales Tax of 2.90%. Of that 15% State Marijuana Sales Tax, 10% is shared back to the City. Thus, the that total taxes on marijuana in Grand Junction could be set at such rates as 25.62% (with the 5% special marijuana sales tax), 30.62% (with a 10% special tax), and so on.
Where could marijuana sales businesses be located?
Marijuana stores are commonly permitted in zone districts that allow other kinds of retail businesses. Currently, in Grand Junction, that would be the various Commercial, Business, and Mixed-Use zone districts. Communities often also adopt buffers for marijuana businesses, such as 500 feet from K-12 schools (public, private, and parochial) and from main campus of a university/college. Other buffers could be put in place for parks or places of worship, as well as between marijuana stores. The size of the buffers can also be altered (such as to 500 or 1000 feet). This means that marijuana businesses can be considered in areas that are already generally recognized as commercial and business areas, sometimes in industrial areas, and not in residential areas.
City Council will also consider the number of locations for marijuana stores. There is no Local or State law that would require a limit to be placed on the number of stores. However, a combination of zoning and buffering cannot reduce the number of marijuana stores below approximately 30 without having complex and uneven impacts on the real estate market. The City anticipates that more than 50 potential operators may apply for marijuana stores licenses, which may be more than City residents desire and/or more than demand can support in the long-term. Therefore, the City Council is considering setting a limit on the number of licenses that it will grant.
How are marijuana sales licenses granted?
A City Clerk is typically responsible for the management of license applications and any selection process. A Marijuana Licensing Authority, similar to a Liquor Licensing Authority, would likely be established as a non-biased body to oversee essential elements of the application review process. The exact length of this process depends upon the review time for each component, and typically takes three and six months in total. More complexity occurs if the City sets a numerical limit on stores. Some communities rely on random (i.e. lottery) systems to select operators. Other communities use a merit-based or competitive approach. Others blend qualifications with random selection. In each of these cases, process looks something like this:
- License Availability – The City Clerk will post a notice of license availability on the city’s website, opening an application period for the filing and acceptance of new applications.
- Pre-Application Meeting – A mandatory preapplication meeting between the licensing jurisdiction and the applying entity is scheduled and held.
- Application Filed – An application, with all fees and forms, is filed by the applicant.
- Fingerprinting – All controlling beneficial owners, owners, and managers are fingerprinted.
- Selection – If there are more applicants than available licenses, a public lottery or a merit-based selection process is conducted, usually involving the Marijuana Licensing Authority.
- Community Development and Building Department Reviews – Upon being selected in the lottery, the applicant initiates and completes planning and building reviews for their proposed site.
- State Licensure – Upon being selected in the lottery, the applicant proceeds with obtaining a state-issued marijuana business license and files evidence of licensure with the City Clerk.
- Local Licensure – Upon receipt of the conditional state license and Certificate of Occupancy, and successful inspections, a local license is issued and business operations may begin.
What comes next?
The final decisions on where marijuana stores can be located, how many will be licensed to operate in the City, at what rate they will be taxed, and how they will be licensed will be made by City Council with feedback from the community. These questions are the subject of the City’s ongoing Marijuana Regulations Survey and of eight public listening sessions hosted by City staff and City Council. City Council Workshops on this topic are scheduled for June 7, 2021 and July 19, 2021.
How can community members provide input?
Take the online survey here (en español), leave a comment below, or participate in a scheduled listening session.