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HB 1045: Give Counties Small Toke on GOP Marijuana Tax

Representative Ernie Otten (R-6/Tea) is co-sponsoring Senate Bill 25, the component of the Legislature’s glut of marijuana bills that would impose a 15% excise tax on all marijuana. But apparently not satisfied with SB 25’s mere collection of that tax and assignment of the proceeds to a new state marijuana fund with no specified use, Rep. Otten has filed his own tax bill, House Bill 1045, which would tax marijuana and allocate the proceeds to specific uses.

HB 1045 would impose a 15% sales tax in lieu of the standard 4.5% state sales tax on marijuana and marijuana products. HB 1045 then specifies who gets what cut of that pot revenue:

  1. The first cut goes to the Department of Revenue to cover whatever costs it incurs in collecting the pot tax.
  2. The next $10 million goes straight to the state general fund, where the state may use the money for whatever it feels like.
  3. After collection expenses and the first $10M tranche to the general fund, the state splits any remaining revenue 50-50 with the counties. The state still puts its half in the general fund. The counties must use their half either to build, repair, or renovate their courthouses, jails, county roads, or bridges or reduce the county property tax levy.

The Legislative Research Council has estimated that a 15% tax on marijuana could generate $21.4 million. To my knowledge, the LRC has not issued a breakdown of the cost of administering a 15% sales tax on one set of products separate from the standard state sales tax. But let’s assume the Department of Revenue would need four full-time-equivalents’ worth of labor and some software and paper clips to manage this separate tax category. Give Revenue the $0.4 million from LRC’s estimate, and the state has $21 million a year to divvy up. The state would get $15.5 million—the first $10 million, plus half of the remaining $11 million. Our 66 counties would get slices of the remaining $5.5 million, and average of  $83.3K per county.

Whether the pot-happy Legislature chooses a partially dedicated 15% sales tax or an all-mad-money 15% excise tax, keep in mind that even as they move toward liberating marijuana users, Republicans are looking to impose new taxes and make government bigger.

30 Comments

  1. larry kurtz 2022-01-09

    It’s very brave, even progressive of Mrs. Noem to give tribes a head start in America’s budding cannabis industry. But I was wrong about John Thune leaving for the private sector so I’m probably wrong that South Dakota Republicans can’t write cannabis laws she will sign.

  2. Marcia Whiting 2022-01-09

    Growing government? Hmmmm. I thought the GOP was opposed to that?

  3. grudznick 2022-01-09

    Why are we taxing the demon weed at all? Lar, you don’t pay tax on your weed you transact in the Spearfish city park today, so why should it cost you more when you go to Walgreens to get it?

  4. jerry 2022-01-09

    All the more reason to consolidate county’s. Why renovate a courthouse in Gann Valley or some of these other county seats that barely have the population to fill a phone booth.

    Put the money towards education like what was supposed to be done with gambling. I see huge development housing for more government bloat in Pierre, just like with gambling.

  5. Porter Lansing 2022-01-09

    Colorado Pot Taxes Primarily Support Public Education (Yes. That includes teaching students TRUE HISTORY and critical thinking skills, Governor Noem.)
    – Colorado subjects’ medical marijuana to the standard 2.9% state sales tax rate. Recreational marijuana and marijuana products are subject to a special 15% sales tax rate, called the “retail marijuana sales tax”.
    – Local governments add their own marijuana sales and industry taxes on top of the state taxes, giving most recreational pot purchases a tax rate in the mid- to high 20s.
    – Public education in Colorado receives marijuana tax revenue through the state’s Building Excellent Schools Today (BEST) fund — a matching grant program — and the Marijuana Tax Cash Fund.
    – The BEST fund annually receives either $40 million or 90 percent of the state’s 15 percent wholesale and excise tax revenue on recreational pot sales, whichever is greater.
    – The remaining tax revenue from the state’s special sales tax on recreational marijuana goes to the General Fund and a local government shareback program for cities and counties with marijuana businesses, which receives 10 percent.
    -Revenue from Colorado’s 2.9 percent standard sales tax on pot sales also goes toward the Marijuana Tax Cash Fund.

  6. grudznick 2022-01-09

    Public education in South Dakota, Mr. Lansing, gets plenty of money today. No matter how much money they get, they just whine for more. And make no mistake, it is the fatcat administrators that blow it all and don’t give a little to the best teachers on the SILT scale (Seven Indisputable Levels of Teachers.) If levels 1 and 2 got more money, then maybe we’d support a new tax. But the fatcat administrators will eat it all up.

    So no more taxes until this gets resolved in a conservative, common sense manner. Mr. Otten will discover he is viewed as a libbie before you know it and change his tune.

  7. larry kurtz 2022-01-09

    New Mexico Regulation and Licensing Department’s Cannabis Control Division has announced that the rules for businesses to manufacture, sell and transport are now in effect. Sales are expected to start by April 1 and more than 300 applications for licenses have been submitted.

    Here in the Land of Enchantment supporters are lauding cannabis legalization as a way to diversify New Mexico’s economy, bring in tax income and address inequities left by the war on drugs while balancing the state’s water crisis with growers who must prove they have valid and sufficient water rights. But groundwater is notoriously corrosive in much of New Mexico while prolonged drought bleeds supplies to critical and coveted acequia rights can literally be to die for.

    The New Mexico Department of Health will continue to maintain the patient registry for the therapeutic cannabis program while ensuring sales remain tax-free.

  8. Arlo Blundt 2022-01-09

    Well…I’m disappointed by the whole greedy deal….if we’re talking taxation the bill should guarantee funds (a million each is a good start) to the ten largest school districts, municipalities, and counties. Additional funds in smaller amounts to smaller municipalities and counties….school districts of small size should have to put together cooperative programs of instruction to get funds. Cut out the state entirely. The state will save millions in prison and law enforcement funds.

  9. jerry 2022-01-09

    While we dither on a few million from pot sales, New Mexico shows us how to make real money.

    ” Pattern Energy Group has announced that its massive 377-turbine Western Spirit Wind facility in New Mexico, with a name plate capacity of over 1 gigawatt, has gone on line. It can provide electricity to 365,000 homes. Pattern also built a 155-mile 345 kV (Extra High Voltage) transmission line, which cost $1.8 billion. The total investment in the wind farm is $2.1 billion.

    And this is only the beginning. Pattern is going to put another $6 billion into New Mexico wind projects.”

    Indeed, New Mexico will be like Saudi Arabia in the production of energy. Instead of pollutant fossil fuel, renewable energy. The good citizens of New Mexico can also expect a pay raise.

    “New Mexicans pay on average 13 cents a kilowatt hour for their electricity. Onshore wind farms nowadays typically generate electricity for 3.9 cents a kilowatt hour in the US. So these wind projects will over time lower electricity costs and be the equivalent of a pay raise for the state’s residents.”

    They now will have good reefer and will have much cheaper power rates, and lower taxes to go with cleaner air. I can toke to that.

  10. Porter Lansing 2022-01-09

    Don’t forget the details, SD. There are products sold in cannabis stores that aren’t cannabis but are still subject to sales tax. i.e. Tee shirts, trinkets and souvenirs, smoking accessories etc..

    – grudznix says SD schools already get enough money. “From the mouths of fools … ”
    – I’m only posting what a progressive state uses it tax money for, grudznix. Not giving advice to South Dakota.
    – From what I see, the state of SD is already choking an infant industry with overreach. You’ll pay for that, in the long run. Hopefully, your cannabis patrons will still see the advantage in taking a trip to CO for sightseeing, recreation, and shopping.
    – Colorado cannabis products are the highest quality and the safest in America.
    – California has wine. Wisconsin has cheese. Colorado has cannabis.
    – Don’t be fooled by chemical laden, pesticide soaked, untested marijuana that could make you sicker than Covid does. Not to mention dangerous vaping products and inhalation devices.

  11. grudznick 2022-01-09

    Will the state prison really save money by jailing fewer of these dope fiends, or will they have to lock up a whole bunch more murders and thieves or fellows who turned from the demon weed to the Satanic poppy?

  12. jerry 2022-01-09

    My pal in Colorado Springs tells me that people already know what they like and they now just go to the vending machine to get it. How cool is that?

    “(CNN Business)You can now buy weed out of a vending machine at certain dispensaries in Colorado, America’s oldest market for recreational cannabis.

    A startup called Anna — a play on the word “analytics” — has begun deploying high-tech, self-checkout cannabis kiosks at select dispensaries in the state.
    The machines can hold more than 2,000 products that include cannabis flower, edibles, infused beverages, balms and vape oils. The machines are ideal for the shopper who knows what they want and doesn’t want to wait in potentially long lines, the company says.”
    https://www.cnn.com/2020/08/19/business/cannabis-vending-machines-trnd/index.html

  13. Porter Lansing 2022-01-09

    Jerry brings up an important choice, especially this week in Colorado because the grocery workers labor strike begins Wednesday.
    Being a union member, I never use the self-checkout lane in the grocery store.
    And, I won’t cross a picket line to shop at a Kroger store, that made double bank for the last two years and won’t pay their workers (who’ve been risking their health) some of Kroger’s windfall profits.

  14. Mark Anderson 2022-01-09

    Well it’s nice to know that pot will help the schools. It made it bearable when I was in high school. The only time I didn’t have a quick comeback in high school was when my “guidance” counselor said about my getting accepted at Vermillion, “your going there to smoke pot, right?”. Up until that time I didn’t realize how astute she was. I guess growing my hair, listening to the Stones and Velvet Underground gave me dead away. Talk about advertising, who knew? Luckily I gave that up, not the Stones or VU but pot decades ago right after undergraduate school. It’s just a glass of demon wine today grudz you whiner. Right after marijuana becomes legal they should clamp down on the bacon served at breakfast, its just common sense.

  15. Mark Anderson 2022-01-09

    You know grudz, I’ve got two people to bring up in relation to demon weed. 9413073p0. Saw both of them. Waylon Jennings and Willie Nelson. Need I say more?

  16. Mark Anderson 2022-01-09

    That was the demon weed interfering with my typing.

  17. Mark Anderson 2022-01-09

    Actually it was the demon wine interfering with my typing.

  18. jkl 2022-01-09

    Maybe I’m reading this wrong, but if the Repubs are seeing how to spend this money rec Mary Jane may actually pass.

  19. Loren 2022-01-09

    Your “new” GQP! The old GOP favored less taxes and less regulation. These folks are morally opposed to MJ… we’ll, unless there is $$$$ in it. This circus would be fun to watch if it weren’t so pathetic!

  20. M 2022-01-09

    Seems ironic to tax weed for school money when we teach kids to just say no.

  21. grudznick 2022-01-09

    9413073p0 indeed.

    *nodding head with befuddled look, pretending to understand*

    9413073p0. Yes, that is it. Probably the real answer to life, the universe, and everything.
    There will probably be a new TV movie on the internet flix. “9413073p0 is the new 42.”

  22. Porter Lansing 2022-01-09

    We teach kids to say no because they’re kids.
    Adulthood isn’t about being told to say no.
    That’s so German it makes my kraut sour.
    Adulthood is about choices.

  23. jerry 2022-01-09

    School systems are broken. It will take a decade to straighten this up. In the meantime, the learning experience of children being around other children is out the window. Communications between kids is always a challenge, but with this pandemic and the traitors to America still here, I think the only ones left standing will be China and the European Union.

    We can certainly try to make good for our children by putting this reefer money towards education as a start, but it will take billions and it will take dedicated teachers that can make a profession out of teaching, a long time to fix it. That is one old soldiers take on that.

  24. Porter Lansing 2022-01-09

    You’re spot on, Jerry. If Gov. Noem can lie and tell America that SD has the #1 economy, when it’s really #31; she can just say SD has the best school system, too. Nobody in the majority has the courage to stand up to her BS stories.

  25. jerry 2022-01-09

    Mr. Lansing, remember that Obama fellow? I know you remember the fact that he laid out a roadmap for his predecessor and all the rest who follow. on how to deal with a pandemic. trump and NOem ignored it and their killings began.

    Here is a refresher ““Playbook for Early Response to High-Consequence Emerging Infectious Disease Threats and Biological Incidents.” Wow! An actual playbook, that republicans ignored… who would’ve thunk it.

    69 pages on what and how to deal with a pandemic, right at their fingertips…and yet, they let people die, by lying about it’s existence while the killing was happening. Cold man, just cold.
    https://s3.documentcloud.org/documents/6819268/Pandemic-Playbook.pdf

  26. Cory Allen Heidelberger Post author | 2022-01-10

    Jerry, maybe this marijuana revenue, along with any other additional revenue dedicated to counties, should be conditioned on consolidation, just like state aid to education. Divide the marijuana aid up among counties with population of 2,000 or more. That would leave out nine counties, starting with Buffalo County (the 1,948 people spread out around Gann Valley) and working down through Mellette, Haakon, Jerauld, Sully, Campbell, Harding, Hyde, and Jones (the only sub-K county at 917). Continge state aid on meeting a population minimum, and those sparse spaces would either merge with their neighbors or work to boost their population by issuing free licenses to grow cannabis.

  27. Cory Allen Heidelberger Post author | 2022-01-10

    But let’s not get too excited about more sin-tax revenue. The point of taxing marijuana should be to discourage an unhealthy habit. As with the cigarette tax, the marijuana tax should go first toward drug rehab, with the ultimate goal of someday getting no revenue from marijuana, as people finally stop wasting their money on it.

  28. jerry 2022-01-11
  29. Porter Lansing 2022-01-11

    Jerry – The Republican Governor of CO in 1942, Ralph Carr sold 2/3rds of Colorado water rights to Kansas and Nebraska.
    Not only does NE get the water, they get to appropriate land from private individuals to build water retention storage facilities.

  30. cibvet 2022-01-11

    If the treaty of 1923 is still enforceable for white Nebraskans, why not the treaty of 1868 for the Indians? Curious minds would like to know. Seems like the populace is at the mercy state politician whims, whether it be any taxes or treaties .

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