As legalization of marijuana proceeds in fits and starts, the Colorado Task Force Report would impose at tax at the producer level while mandating vertical integration — combining the producer and retailer functions — so that every transaction requires determination of an arm’s-length inter-company price. That’s a recipe for chaos, involving the wishfully named arm’s-length method of guessing at tax pricing, a tool grown so feeble that it has turned the international tax schemes of the mightiest nations into laughingstocks.
[1] How much was that product worth when the selling operation of the integrated company “acquired” it from the producing function? At least this set-up will create jobs — for attorneys and accountants.
The Task Force is proposing a retail level tax in addition to the producer level tax mentioned in the Amendment 64 initiative. That’s better, for a vertically integrated company. The point to tax on a price basis is when there is a sale to an unrelated party – at an actual market price. That happy tax measurement opportunity would also have been present if the Task Force had moved away from vertical integration.
[1] Cf. Charles I. Kingson, ‘‘The Great American Jobs Act Caper,’’ 58 Tax L. Rev. 327, 387 (2005) (‘‘Deciding how much one’s left hand contributes to one’s right may constitute a career, but not much of a life.’’).
The Center for New Revenue 