Director of Colorado’s Office of Marijuana Coordination talks taxes, ‘gray market’ |

Director of Colorado’s Office of Marijuana Coordination talks taxes, ‘gray market’

LivWell store manager Carlyssa Scanlon shows off some of the products available in the marijuana line marketed by rapper Snoop Dogg in one of the marijuana chain's outlets south of downtown Denver.
Associated Press | AP

DENVER — The Governor’s Office of Marijuana Coordination for Colorado fits in a space that’s about the size of an efficiency apartment.

The deputy director’s desk is to the right after stepping inside the room. The director, Andrew Freedman, has an office a few feet away with a door you can close.

Empty desks and chairs are huddled just to the left of the entrance. A few photos and images adorn the walls. All carry the theme of 1920s Prohibition.

One picture shows two men in dress shirts and pants. They stand by a curb, pouring liquor down a drain.

“Change is not all immediate,” Freedman said of his state’s own struggles with the legalization of a substance long prohibited. “It’s definitely part of the ongoing discussion.”

Colorado, the first state to legalize recreational marijuana, shares similarities to California. Both have taken incremental steps toward taxing and regulating cannabis, Freedman said.

California will take its next step on Nov. 8 when voters will decide on Proposition 64, called the Adult Use of Marijuana Act. If passed, adults 21 and older could legally use recreational marijuana.

It’s a decision Colorado voters made years ago.

Colorado approved medicinal marijuana in 2000. Years later the state’s legislators passed regulations for medical marijuana that became effective in 2010.

Two years after that voters approved recreational pot, which became effective on Jan. 1, 2014.

“There was a lot of change in a short period of time,” Freedman said. “In some ways, that’s good.

“I don’t think it’s smart to do this piecemeal,” he added.

Challenges remain for Freedman’s office. He advises California lawmakers to closely examine the issues caused by an unregulated system.

That’s Freedman’s biggest problem — people who legally grow marijuana but sell the product outside of Colorado, what he called the “gray market.”

Freedman must walk a tightrope when it comes to regulations. He fears that every new rule could push someone into the gray market. It’s very difficult to track those who grow at home, one reason he urges California to ensure it addresses the problem of its own gray market.

Pot and taxes

Colorado has drawn hundreds of millions of dollars in tax revenue despite those problems.

The state received almost $130 million in 2015 from marijuana-related taxes and licensing fees. It had collected over $105 million through July of this year.

Medical and recreational cannabis is taxed differently. There’s a 2.9 percent tax on medicinal marijuana. Recreational pot has an additional 15 percent excise tax and 10 percent sales tax, in addition to any taxes local jurisdictions add.

“I don’t love it because of the people who are using medical marijuana as a tax break,” Freedman said. “I think that it’s an unfortunate situation.

“The gray market is a much bigger concern for me,” he added.

Medical marijuana patients in California would pay no sales tax under Prop 64. Everyone, however, would pay a 15 percent excise tax.

The money from marijuana coming into Colorado’s coffers is significant, Freedman said, though he cautions against expecting immediate results from legal pot.

The money has paid for substance abuse programs and after-school activities, but Freedman has found that some Colorado residents expected to see the immediate construction of new schools. He said $40 million is allocated each year to school construction, though it takes time to see the results.

“I just want to warn people — don’t expect huge changes,” he said.

“Tax revenue should not be people’s main reason for doing this,” Freedman added.


Freedman pointed to criminal justice reform as one change legalized marijuana made in his state. According to “Marijuana Legalization in Colorado: Early Findings,” a report released in March by the Colorado Department of Public Safety, marijuana-related arrests decreased by 46 percent between 2012 and 2014. Marijuana-related court filings dropped 81 percent between 2012 and 2015.

The report also focuses on crime and traffic statistics.

Burglaries became the most common marijuana industry-related crime in Denver in 2015, reaching 63 percent of those crimes, the report states.

Traffic data, while limited, shows that fatalities involving THC, the component in marijuana that makes people high, rose 44 percent from 2013 to 2014. The report, however, states that THC in someone’s blood doesn’t mean the person was impaired.

California officials regularly contact Freedman for information on marijuana, like that found in the March report. He speaks monthly with Lori Ajax, chief of California’s Bureau of Medical Cannabis Regulation. He’s hosted California officials when they’ve visited Colorado and visited the Golden State himself, answering questions about Colorado’s marijuana laws.

When asked how he’d vote on Prop 64 if he lived in California, Freedman offers a small smile.

That’s one question he won’t answer.

To contact Staff Writer Alan Riquelmy, email or call 530-477-4239.

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