The businesses argue that the practice is illegal under the state's constitution and unfairly punishes consumers.
The contentious issue of excessive taxation on recreational marijuana sales is now the subject of multiple lawsuits filed in Missouri this past week. For many cannabis consumers in the "Show Me State," prices for their favorite products rose considerably on October 1 when new local taxes took effect.
Now, according to multiple local and national media outlets, marijuana businesses in the state are pushing back on what they refer to as "stacked" taxes. In November 2022, Missouri voters approved a constitutional amendment legalizing adult-use cannabis sales. Contained within the language of the amendment were several provisions about taxation, including allocation for a 6% statewide excise tax and authorization for local governments to impose up to a 3% sales tax on all products sold.
The question argued in lawsuits brought in Buchanan and St. Louis counties by a pair of marijuana businesses is whether some of those taxes are legal under the new amendment. In particular, the plaintiffs are challenging the legality of local taxes being "stacked," meaning a retail dispensary within the boundaries of an incorporated city must collect a county-imposed tax and any taxes approved by the municipality. In contrast, businesses in unincorporated areas must only collect county taxes.
The two suits were brought by Robust Missouri Dispensary 3 in St. Louis County and St. Joseph Dispensary Vertical Enterprises in Buchanan County, with both cases directly challenging the legality of stacking taxes in an incorporated area.
In the St. Louis suit, Wayne Wallington, director of the Department of Revenue, and St. Louis County are named defendants, while in the Buchanan County case, Buchanan County Collector Peggy Campbell is the sole defendant.
Both lawsuits seek a declaratory judgment and injunction to halt the Missouri Department of Revenue from collecting any sales taxes levied in the two counties. For the owners of Robust Missouri Dispensary 3, the ramifications of the stack taxes being allowed to continue are dire.
According to the details of their suit, if the court does not issue an injunction, Robust "will suffer irreparable harm by being required to collect sales tax from its customers above what is authorized by Article XIV of the Missouri Constitution, thereby permanently damaging those customer relationships."
Similarly, in their case against County Collector Peggy Campbell, the owners of Vertical Enterprises contend that their business would be "irreparably harmed" if forced to collect both county and city taxes.
The Missouri Cannabis Trade Association issued a news release last week announcing the St. Louis lawsuit in which it characterized the attempt to collect both taxes as an "unconstitutional money grab" that directly violates the reform amendment legalizing recreational cannabis in the state.
"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 Andrew Mullins, MoCann's executive director.
"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."
- Andrew Mullins, Executive Director of The Missouri Cannabis Trade Association
Even though it's been less than a year since voters approved the amendment, Missourians are already spending close to $100 million a month on adult-use marijuana sales, according to Jack Cardetti, spokesman for the trade group. Since its passage, roughly three dozen counties have enacted a local tax. Likewise, the state Department of Revenue, which collects taxes for local municipalities, has alerted retail establishments located where a city and county tax is in place that both must be charged.
"It equates to approximately $3 million a month that Missouri cannabis customers are being forced to pay when that is not what the constitution says," Cardetti said.
"It equates to approximately $3 million a month that Missouri cannabis customers are being forced to pay when that is not what the constitution says."
- Jack Cardetti, Spokesperson for The Missouri Cannabis Trade Association
For their part, county officials believe they have constitutional authority to impose the tax on cannabis sales in their jurisdiction. "It is a very minimal amount, and I think the law is very clear that the counties have the ability to do this," said Steve Hobbs, executive director of the Missouri Association of Counties.
With both sides firmly entrenched and feeling completely justified in their respective stances, the ultimate decision will most likely come from the state's judicial system. Both lawsuits are in their early stages, with a hearing to set a trial date for the Buchanan County case scheduled for sometime in early December.
The outcome of the two cases could have a powerful ripple effect across the state. Dan Viets, a Columbia attorney specializing in the defense of marijuana cases, thinks the suits could set a precedent across the state, depending on the courts' decisions.
"I believe this lawsuit will have important implications across the state and here in Columbia where this tax misapplication is currently in place [in Boone County]," Viets said.
"I believe this lawsuit will have important implications across the state and here in Columbia where this tax misapplication is currently in place [in Boone County]."
- Dan Viets, Cannabis Attorney
Regardless of the legal outcomes, the Missouri case study could have massive repercussions for all states with legal and regulated adult-use cannabis markets. With the issue of excessive taxation plaguing many state programs, a clear and definitive legal judgment on the legality of "stacked" taxes could go a long way in establishing a fair and consistent manner of enacting and levying taxes across the entire cannabis industry. For now, all eyes are on Missouri.
