St. Louis County dispensary becomes next to challenge stacked marijuana taxes in Missouri courts
The owners of Robust – which operates the Feel State marijuana dispensary in Florissant, have taken legal action against St. Louis County and the Missouri Department of Revenue, buoyed by the backing of the state’s burgeoning cannabis sector.
The lawsuit spotlights an ongoing tax issue that has been brewing adult use legalization was passed in November 2022. Numerous counties in Missouri, including St. Louis County, recently began imposing a local 3% tax on adult use marijuana sales, which when combined with a municipal 3% tax, infringes on the directives laid down in Article 14 of the Missouri Constitution, according to the lawsuit.
The constitution permits a municipal tax of up to 3% on adult marijuana sales within city confines, subject to voter approval. Additionally, it allows counties to tax marijuana sales in unincorporated areas. The contention arises from counties levying an additional 3% tax on sales within incorporated areas that fall within county lines, a move seen as unconstitutional by industry stakeholders.
Robust’s challenge becomes the second in the state aiming to halt this tax stacking, which if successful, could alleviate Missouri cannabis consumers of a roughly $3 million tax burden monthly.
Robust has sought clarity and injunction on the taxation of adult-use marijuana sales within Missouri, challenging the current practices under Article XIV of the state’s Constitution.
The filing seeks:
A. A declaration that Article XIV of the Missouri Constitution does not authorize a county to impose and ask the Director to collect a local government tax on retail sales of adult use marijuana occurring at a Missouri marijuana dispensary facility located within the boundaries of an incorporated village, town, or city.
B. A declaration that Article XIV of the Missouri Constitution only authorizes a county to impose and ask the Director to collect a local government tax on retail sales of adult use marijuana occurring at a Missouri marijuana dispensary facility located in an unincorporated area of that county.
C. An injunction enjoining the Director from collecting any sales tax enacted by St. Louis County pursuant to Article XIV of the Missouri Constitution from sales of adult use marijuana at Plaintiff’s dispensary facility located within the boundaries of Florissant.
In a statement Missouri Cannabis Trade Association (MoCannTrade) Executive Director, Andrew Mullins, emphasized the lawsuit’s potential to cease the unconstitutional stacking of local taxes on marijuana consumers.
“Today’s lawsuit should eventually put an end to Missouri adult use marijuana customers having to pay stacked local taxes, which violate the Missouri Constitution and the will of the voters,” said Mullins. “We are proud to work with our industry partners to stand up for Missouri cannabis customers against this unconstitutional money grab. We are thrilled to see local governments across Missouri embrace having marijuana facilities and sales in their communities, but we also must guard against the overtaxation of cannabis. Years of experience in other states confirm that higher taxes on safe, regulated products always drive consumers to the illicit market.”
Last month, Vertical, a St. Joseph-based dispensary, brought a similar suit against Buchanan County on the western side of the state.
The lawsuits come in the wake of Missouri’s 2022 legalization of adult-use marijuana, which introduced a new revenue avenue for local governments through adult use marijuana sales tax. However, the overlapping tax imposition by some local authorities is seen as a breach of law.
Christopher McHugh, CEO of Vertical, elucidated at the time that the case brought by Vertical underscores a clear overreach by counties, terming it as an “unfair” and “greedy” action.
The Missouri Constitution delineates the rights of local governments—in incorporated areas, a village, town, or city, and in unincorporated areas, a county—to levy sales tax on marijuana. The crux of Vertical’s argument, emphasizing that the two tax impositions are not meant to stack atop each other.
The Department of Revenue, initially in agreement with this interpretation, reversed its stance in February, allowing multiple local bodies to concurrently impose the additional sales tax. According to Amendment 3 authors, the intention was to limit the tax to 3%, with revenues aimed at maintaining local infrastructure surrounding dispensaries.
Vertical is seeking a permanent injunction against Buchanan County to prevent the stacking of a 3% county tax on the existing city tax. The dispensary argues that as per the Missouri Constitution, Buchanan County is not a “local government” concerning Vertical’s location within an incorporated area, hence, its tax imposition is unauthorized.
The issue of tax stacking has been a hot topic for discussion, with Vertical being the pioneer in challenging this practice in court. The timing of this lawsuit is crucial for Vertical, as they have opted not to collect the county tax, making legal redress imperative.
