Colorado Marijuana Lawsuit Claims State Inflated Taxes Through Market Distortions

By Christopher Osher | Colorado Politics

Plaintiff says state owes over $100 million in refunds

This article was produced in partnership with ProPublica’s Local Reporting Network.

The regulators of Colorado’s first-in-the-nation recreational marijuana market have allowed so many sham transactions in the industry to proliferate that honest cultivators and manufacturers shoulder an unfair excise tax burden, claims a lawsuit filed on Thursday that seeks class-action status.

The lawsuit, filed by a large-scale marijuana cultivator in the state, claims the state owes millions of dollars in tax refunds. It alleges failures in enforcement by the Marijuana Enforcement Division have allowed “distortions” in how the state calculates the average market rate (AMR) for unprocessed marijuana that the state uses to set owed industry excise taxes.

The state calculates the AMR by tracking sales transactions reported by manufacturers and cultivators, but the lawsuit claims Colorado has allowed so much fraudulent reporting that the state’s estimated market values are bogus.

It claims that the state’s average market rate for marijuana “has ceased to function solely as an estimate of lawful category-specific market value.” Instead, that calculated rate “functions, at least in part, as a rough proxy for the amount of unpoliced distortion” state officials knowingly allow to exist in the market, according to the lawsuit.

READ THE FULL ARTICLE AT COLORADO POLITICS