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Missoula county commission considers 3% local-option marijuana sales tax
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Missoula county commission considers 3% local-option marijuana sales tax

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Montana counties that can sell recreational marijuana on Jan 1, 2022

A map showing which counties in Montana that will be able to have licensed businesses selling recreational marijuana starting on Jan. 1, 2022. Only counties where a majority of voters approved Initiative 190 can operate recreational marijuana businesses.

The Missoula County commissioners are considering asking voters to approve a 3% local-option sales tax on all marijuana products. Details haven't been worked out yet, but the money might go to property tax offsets or homelessness prevention.

County communications manager Allison Franz said the three commissioners are seeking public comment until July 6 on the matter. Their first public hearing on the issue will be on Thursday, July 1 at 2 p.m. in the Sophie Moiese Room of the Missoula County Courthouse, and participants can also join remotely.

“Current projections, based on a report issued by the University of Montana’s Bureau of Business and Economic Research, estimate the tax would generate around $716,000 annually,” Franz said in an email. “Missoula County would retain 50% of the revenue, 45% would go to the City of Missoula and the remaining 5% would go to the Montana Department of Revenue to defray costs associated with administering the tax.”

House Bill 701, passed by the Montana Legislature and signed into law by Governor Greg Gianforte earlier this year, allows for operation of marijuana businesses and the taxation of retail sales of marijuana in counties where the majority of voters approved Initiative 190. That initiative legalized the possession and sale of recreational marijuana in Montana.

“In Missoula County, 70% of voters approved I-190 in the 2020 general election,” Franz said.

House Bill 701 authorizes counties to adopt a resolution to place a local-option marijuana excise tax of up to 3% on the ballot. If voters approve the measure, the tax would go into effect 90 days later and would apply to all marijuana and marijuana products sold at dispensaries in the county, including medical marijuana dispensaries. As of May 7, there were 48 marijuana dispensaries in Missoula County registered with the Montana Department of Health and Human Services.

On Jan. 1, 2022, any established medical marijuana dispensary in Montana can start selling marijuana to all adults age 21 and over.

Franz said revenue from the tax may be used for any activity, undertaking or administrative service that a jurisdiction is authorized by law to perform, including costs due to administrative burdens imposed as a result of licensing or regulatory requirements.

“Though city and county officials are still considering what the revenue could go toward, options being explored include using a percentage to offset property taxes, as well as funding community needs like the mobile crisis unit and preventing homelessness,” Franz explained.

The local option provision was a bone of contention as legalization worked its way through the legislative process. Several GOP lawmakers argued the additional tax, on top of the mandatory 20% tax on all cannabis sales, would undercut the tax benefits by encouraging people to continue buying from the black market. Others contended it would open the door for any county to impose a local-option sales tax on regular goods.

“This is the day that we opened the door to this new tax that will find its way into communities,” Rep. Bill Mercer, a Billings Republican, said during the House floor debate in April. “We will rue the day we did this.”

Dave Fern, a Democratic Rep. from Whitefish, countered that the marijuana tax wouldn’t be a harbinger for a general sales tax. Local option sales tax on common goods has already proven difficult enough to pass at the local level, he said.

The tax option was nearly stricken from the law but was ultimately left in after a series of compromises. Another product of the horse-trading: roughly half of Montana’s counties, primarily in the eastern half of the state, that locally voted against legalization in 2020 will continue to prohibit cannabis sales in any form, despite marijuana possession remaining legal statewide.

In those “opt-in” counties, local voters can petition county officials for a special election to allow retail marijuana sales. Likewise, “opt-out” counties, those who voted to approve legalization last year, can petition for a special election to end cannabis sales in their local jurisdiction. Medical marijuana providers were grandfathered-in for their locations, regardless of how the county voted.

The Bureau of Business and Economic Research report cited by the county for the estimate of annual tax revenue on pot sales was written in September of 2020, although legislative fiscal analysts considered it still sound after changes made by the Legislature. In the report, economists Patrick Barkey and Robert Sonora projected that in the year 2022, there would be $217 million worth of marijuana sold in Montana, with nonresident visitors buying nearly $30 million of that total. By the market's fourth year in action, the BBER projected the state would see more than $50 million in tax revenue.

They used federal data to estimate how many adults used marijuana in Montana.

“Like research on cannabis usage in other western states, we find for Montana that more adults say they use cannabis than the national average,” Barkey and Sonora wrote. “The most recent National Survey of Drug Use and Health reports that 14.3% of adults in Montana said they used marijuana in the last 30 days, compared to the national average of 9.3%.”

Those who use marijuana daily or near-daily make up only about 22% of all users in the state, but their consumption represents more than 66% of total marijuana consumption.

Sonora said it’s his personal opinion that Missoula County isn’t likely to see a huge rush of out-of-state visitors from places where marijuana isn’t legal for recreational use, like Idaho.

“There’s already a sufficient number of competitors,” he said. “If you’re in Boise, it’s easier to go to Oregon. Missoula’s not a huge tourist attraction. People come here on the way to someplace else, like Glacier. People coming to Yellowstone or Glacier from Pocatello, Idaho, might stop in Butte first.”

Members of the public can submit comment at the commissioner’s public meetings or by emailing or they can call 406-258-4877. Commissioners will vote on whether to approve a resolution to place the tax on the ballot at their public meeting at 10 a.m. on July 6. If approved, the countywide special election would be held either on Tuesday, Sept. 14 in conjunction with the potential Missoula municipal primary election or on Tuesday, Nov. 2 in conjunction with the municipal general election.

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