Missouri Dispensaries Challenge Stacked Local Taxes on Marijuana

On October 1, 2023, Missouri saw a significant increase in marijuana prices as new local taxes took effect, leading to legal challenges in Buchanan and St. Louis counties. The controversy revolves around the interpretation of the constitutional amendment that legalized recreational cannabis sales. This amendment included a 6% statewide excise tax and allowed local governments to impose a sales tax of up to 3%. The central issue in the current legal dispute is whether both city and county taxes can be applied to dispensaries within incorporated cities, a practice known as "stacking."

The Missouri Cannabis Trade Association argues that this stacking of taxes is unconstitutional and goes against the voters' intent when they approved the amendment. Dispensaries have been required to collect both a county-imposed tax and a city-authorized tax, which totals around $3 million per month in additional costs for customers.

Counties assert that they have the authority under the constitution to impose these taxes, and this argument hinges on the broad term "local government" as defined in the amendment. To address this issue, the amendment's drafters used a flexible definition that includes "a village, town, or city" for incorporated areas and only applies to counties for unincorporated places. However, the dispensary operators claim that the amendment's original intent was to prevent such stacking.

Two lawsuits are currently underway in Buchanan and St. Louis counties. Robust Missouri 3 LLC, a dispensary in Florissant, sued the Department of Revenue and St. Louis County, seeking a court order to block the county tax collection. A similar lawsuit was filed by Vertical Enterprises, a St. Joseph dispensary, against Buchanan County Collector Peggy Campbell. Both cases are in their early stages, with a hearing for the Buchanan County lawsuit scheduled for early December.

The Department of Revenue has given conflicting guidance to local governments on the issue of stacking, making it a point of contention. The Missouri Association of Counties lobbied for revised guidance that supports county taxes on marijuana sales, arguing that the ballot language and the amendment's wording allow for such taxation.

For now, dispensaries are continuing to collect both city and county marijuana taxes, pending a legal resolution. The issue of refunds if the courts rule in favor of the dispensaries remains uncertain. As the legal battle unfolds, it may clarify whether these stacked local taxes on marijuana sales are permissible under Missouri law.