Missouri Court Rules ‘Stacking’ Cannabis Taxes is Prohibited

The Missouri Court of Appeals Eastern District's recent decision on cannabis sales taxes represents a significant shift in how local taxation for cannabis sales will be handled across the state. Here's a breakdown of the ruling and its implications:

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The Ruling

1. Key Decision

   
   

   • The appellate court determined that only one local government entity can impose a 3% sales tax on adult-use cannabis sales.

     
     

   • This decision overturns a May ruling that permitted both city and county governments to impose their own 3% taxes on cannabis sales within incorporated areas.

     
     

2. Impact on Tax Rates

   
   

   • Previously, stacked taxes in areas like Florissant resulted in combined sales tax rates exceeding 20% for cannabis products.

     
     

   • The ruling clarifies that in incorporated areas, the municipality (e.g., city or town) is the sole entity authorized to levy the local cannabis sales tax, not the county.

     
     

3. Voter Intent

   
   

   • The decision hinges on the interpretation of the state constitution's language regarding "local government" in the 2022 adult-use cannabis reforms. The court concluded that voters intended "local government" to mean either the municipality or the county, but not both.

     
     

Economic Implications

1. Savings for Consumers

   
   

   • The ruling is expected to significantly lower the cost of cannabis products in affected areas.

     
     

   • According to Andrew Mullins, executive director of the Missouri Cannabis Trade Association, this decision could save Missouri cannabis consumers $3 million per month.

     
     

2. Revenue Adjustments for Local Governments

   
   

   • Counties like St. Louis may face reduced revenue from cannabis taxes, prompting reviews of their financial strategies.

     
     

   • Doug Moore, spokesman for St. Louis County, noted that the financial impact of the ruling remains uncertain.

     
     

3. Broader Scope

   
   

   • The Missouri Department of Revenue reports that 90 counties and 74 municipalities in the state have enacted the 3% cannabis tax, meaning this ruling could have far-reaching effects on local tax structures statewide.

     
     

Legal and Policy Consideration

1. Pending Cases

   
   

   • A similar case is underway in Buchanan County, which may further clarify or expand upon the appellate court’s ruling.

     
     

2. Next Steps for Counties

   
   

   • Local governments affected by the decision, such as St. Louis County, are reviewing the ruling and considering options, which could include appealing to the Missouri Supreme Court or revising tax ordinances to comply with the new interpretation.

     
     

3. Industry and Advocacy Perspectives

   
   

   • Cannabis industry advocates, like Mullins, view the decision as a victory for both consumers and businesses, arguing that high tax rates deter sales and undermine the legal market.

     
     

Conclusion

The appellate court's ruling restricts the ability of local governments to impose cumulative taxes on cannabis sales, simplifying the tax structure for consumers and businesses. While this benefits customers by reducing overall costs, it poses challenges for counties relying on cannabis tax revenue. The decision underscores the importance of clear language in ballot measures and constitutional provisions, as well as the ongoing need for legal and legislative adjustments in the rapidly evolving cannabis industry.