While Springfield and Greene County voters are yet to decide on adding additional sales taxes to recreational marijuana, a battle is brewing across the state over if both a county and a municipality can collect what is known as an “adult use tax” at the same locations.
Proponents of “stacking” sales taxes of up to 3 percent, which is permitted under Article XIV of the Missouri Constitution, argue both a municipal government and a county government have the authority to tax the same dispensaries for recreational marijuana sales.
Opponents of tax stacking include former advocates for Amendment 3, which legalized recreational marijuana for adults 21 and up with its passage in 2022 with just more than 53 percent of the vote. They argue the language of the amendment was clear in its definition of which government entities can enforce the additional sales tax and where, in that two separate adult use taxes can’t be stacked on top of each other.
Springfield, Greene County keep adult use tax off the ballot, for now
The amendment, which is now known as Article XIV of the Missouri Constitution, has language that gives local governments the ability to let voters decide on whether or not the local government in which a sale takes place can add up to a 3 percent sales tax on recreational marijuana.
A portion of Section 6 of Article XIV of the Missouri Constitution reads:
“…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.”
This past election, those tax measures were voted through in many counties and cities across the state, with the question notably absent from ballots in Springfield and Greene County.
Greene County Presiding Commissioner Bob Dixon attributes the decision to omit a tax increase to a busy ballot, especially in Springfield, as well as the lack of data currently available.
“There was quite a bit of new and changing information,” Dixon said. “We also didn’t have any data about sales in the county, so we opted to wait.”
While playing the waiting game, Springfield and Greene County can analyze sales data of recreational marijuana and gauge the impact taxing an additional 3 percent could have on their budgets. They may also determine if they both have a claim to an additional 3 percent at the same dispensaries.
The additional adult use tax, whether it be capped at 3 percent or, if stacked, 6 percent, would be in addition to a 6 percent state tax on recreational marijuana and the base sales tax, which is 8.1 percent in Springfield. Therefore, if the City of Springfield and Greene County were able to stack taxes, recreational marijuana could be taxed at a clip of about 20 percent in Springfield city limits.
Language of Amendment 3 ‘clear’ to some, ‘vague’ to others
Joseph “Chip” Sheppard, a Springfield-based attorney who helped craft Amendment 3, points to the definition of “local government,” which can be found in Section 2 of Article XIV, in determining where government entities have the authority to impose the adult use tax.
“In the case of an incorporated area, a village, town, or city and, in the case of an unincorporated area, a county,” the definition reads.
While the term “stack” is not explicitly present in Amendment 3, Sheppard explained that they meant for there to only be an additional 3 percent maximum tax. By keeping taxes low, Sheppard said Missouri can “kill” the black market for marijuana.
“The language is clear that it shouldn’t be stacked,” he said.
Sheppard went on to explain that because municipal governments are primarily responsible for dispensaries located within city limits, the city should alone be entitled to the additional tax revenue.
“Why would the county get money to do anything?” he asked. “The county is not going to contribute to anything that has to do with the operation of that dispensary. It’s the city that has the building regulations, zoning, fire, police protection. It’s the city that has to do all that for a dispensary.”
Sheppard added that if a facility is located in an unincorporated part of a county, only then should the county be able to collect the adult use tax. As of now, there are no dispensaries in unincorporated Greene County, with all located in Greene County falling within the city limits of Springfield and Republic.
Dixon, while aware of the possible effect stacked taxes could have on creating a “quasi-black market,” argued any tax could have the potential to do that.
“The language is vague,” Dixon said. “They could have made it more clear. The people who drafted it made a mistake.”
Dixon is also making his conclusions, in part, based on guidance from the Missouri Department of Revenue.
The City of Springfield declined an interview on the subject of the adult use tax due to the City Council not having discussed it in any detail. City staffers or council members have reportedly not analyzed the question of tax stackability within Greene County.
Missouri Department of Revenue rescinds earlier guidance, leaves further interpretation to courts
Feb. 1, the Taxation Division of the Department of Revenue sent a letter to the Missouri Municipal League and the Missouri Association of Counties, clarifying that a city and county cannot stack the 3 percent sales tax permitted under the amendment.
“A city and a county may both present ballot language for vote, an amount not to exceed 3 percent local tax on recreational marijuana,” the letter reads. “However, the tax collected from a customer is limited to the percentage passed, and is based on the location of the recreational marijuana business (facility) and depends on if that facility is located within the incorporated or unincorporated area.”
But later that same month, the Department of Revenue sent a follow-up letter to political subdivisions around the state, rescinding that guidance after, “engaging in public and private stakeholder feedback,” and said that it will no longer advise municipalities or counties on the language of Article XIV.
The letter went on to acknowledge Sheppard’s argument for the definition of “local government,” which was reinforced by additional language that identifies only one local government entity with the ability to enforce the tax.
However, it also agrees with the vagueness Dixon spoke of, and pointed to the fact that there was no distinction made between “political subdivision” and “local government.”
While ultimately rescinding the Department of Revenue’s original determination to allow tax stacking, the letter said voters will decide whether or not to implement the sales tax and the courts, if necessary, will interpret the constitutional language.
“At the moment, neither interpretation is absolute,” the letter reads. “However, the taxation portion of Article XIV does require that tax authorizations be submitted in a proposal ‘ to the voters of the political subdivision, at a municipal, county or state general primary or special election.’ Like the existence of adult use marijuana itself, the people decide if they want sales tax on adult use marijuana sales.”
Greene County to watch stacking efforts in other counties before putting adult use tax on the ballot
Until a court says otherwise, city and county leaders across the state are deciding for themselves whether or not taxes can be stacked.
After voters in some St. Louis area “political subdivisions” approved the adult use tax on April 4, St. Louis and St. Charles counties have indicated their intent to stack the 3 percent on top of the adult use tax in municipalities where the measure was passed, according to reporting from St. Louis-based KTVI.
“Tax law in the state of Missouri is not unlike Swiss cheese…you really have exemptions all over the place,” Dixon said. “It’s different for one tax, like on the stacking, than it is on another one for example. And so you just get a lot of confusion, and I think that’s probably what the department was looking at, is the amendment didn’t specify.”
While Sheppard is adamant stacking is not allowed under the amendment, he does agree with Dixon’s wait-and-see method for Greene County.
“I think it would be wise and reasonable for them to sit back and wait and see what the courts say because any election is expensive,” Sheppard said. “Since there’s a couple of counties that have stuck their neck out, I think that it’ll be a matter of waiting to see how that turns out.”
While Dixon was uncertain on if and when the Greene County Commission would put an adult use tax before the voters, he said it would likely be placed on the same ballot that the City of Springfield may pose the same question.
“I don’t anticipate doing it in August,” Dixon said. “But if we were to do it at a later date, whenever that is, the benefit of waiting is we’re going to have a lot of data, and we would also have to decide what the funds would be designated for.”