St. Louis city officials announced this week that a failure to meet a state deadline has resulted in a delay in the start of a new cannabis sales tax that will cost the city an estimated $500,000 in lost revenue. St. Louis voters approved the 3% cannabis sales tax in April following the statewide legalization of weed in the November 2022 election.
Under Missouri’s marijuana legalization statute, local governments are permitted to add a cannabis sales tax on top of the state’s 6% pot sales tax. Earlier this year, St. Louis city officials put a 3% cannabis tax measure on the ballot, saying that the money would be used to address historic inequalities in the city. Former city Alderman Brandon Bosley, the sponsor of the cannabis tax proposal, said at the time that he hoped the money would be used for programs to help keep at-risk young people out of trouble.
St. Louis voters approved the tax in an April election, giving the city the authority to collect the new cannabis tax. But before that could happen, the city was supposed to submit information including certified election results and a notification to the Missouri Department of Revenue that the tax would be levied. State law dictates that the new tax can be collected beginning on the first day of the second quarter after such notification is made.
If the notification had been made by the end of June, the city could have begun collecting the tax on October 1. Last week, an employee in the city finance department told the mayor’s office that the required notifications to enact the new weed tax had not been sent to the state.
“We’re grateful that they told us because we had no idea,” city spokesman Nick Dunne said in a statement to the St. Louis Post Dispatch.
Oversight Corrected Last Week
Dunne said that St. Louis Mayor Tishaura O. Jones and Casey Millburg, her policy director, worked swiftly to resolve the issue after it came to light. The required paperwork was filed with the state Department of Revenue on November 14 and the city received word that everything was in order the following day. City officials also secured a waiver from the state allowing the tax to be collected beginning in January, rather than in April as prescribed by law.
Because of the error, St. Louis is missing out on the cannabis sales taxes that could have been generated between October 1 and the end of the year. Dunne did not estimate how much revenue could have been collected from the tax during that time. But in May, city Budget Director Paul Payne told the Board of Aldermen that if statewide recreational sales are about $1 billion per year as estimated and the city receives the same share in taxes as it does with other consumer spending, the city’s annual weed tax revenue would be about $2.4 million per year, or an estimated $600,000 per quarter. If the city’s share of the regulated cannabis market is equal to its share of the dispensaries that have opened in Missouri so far, annual revenue would be roughly $2 million annually or approximately $500,000 per quarter.
“Clearly, this is an oversight that even we weren’t thrilled with,” Dunne said.
What’s not clear, however, is which city department is responsible for making the notification to the state to begin collecting the tax. Recently, such submissions have been completed by the mayor’s office. But Dunne noted that the city comptroller’s office and the Board of Elections have also taken care of such submissions in the past. After the oversight was revealed, Jones’ office issued a statement on the city’s failure.
“While state law does not specifically define who is responsible for submitting the required documents to the Department of Revenue, the bottom line is that St. Louis will be precluded from collecting the additional 3% sales tax on cannabis products,” the statement reads. “That is unacceptable.”
“We are looking at what we can do to more clearly define lines of responsibility,” Dunne told reporters.
The shortfall of at least $500,000 is not an enormous portion of the city’s billion-dollar yearly budget. But Alderwoman Cara Spencer, the chair of the Board of Aldermen’s budget committee, said the amount is not insignificant, noting that the amount could pay for a proposed freeze on property taxes for seniors for a year.
“It’s really disappointing,” Spencer said. “We need every dollar we can get.”
“Frustrated is an understatement,” she added. “We just came through a very tough budget cycle. We’re looking at some very stark figures here.”
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