Several marijuana activists and business owners have filed a lawsuit (No Over Taxation v. Hickenlooper) in the Denver District Court, seeking a permanent injunction against the collection of Colorado’s marijuana taxes and a refund of those taxes. In addition to the 2.9% state sales tax, Colorado imposes a 10% sales tax on marijuana retail transactions and a 15% excise tax on the wholesale sale of marijuana from a cultivation facility to a retail store or infused manufacturer. As the manufacture and distribution of marijuana remains in violation of the Federal Controlled Substances Act, the complaint claims that the marijuana taxes require persons subject to those taxes to incriminate themselves as “committing multiple violations of federal law, including but not limited to, participating in, aiding and abetting in, or conspiring to commit a ‘continuing criminal enterprise’ and ‘money laundering.’” As such, the plaintiffs assert that the marijuana taxes violate the Self-Incrimination and Double Jeopardy protections contained in the Fifth Amendment of the U.S. Constitution and Article II §18 of the Colorado Constitution, respectively.
The complaint further contends that the state’s marijuana regulatory scheme violates federal law and is therefore preempted under the U.S. Constitution’s Supremacy Clause. Defendants Governor Hickenlooper and Denver Mayor Hancock are themselves alleged to be “federal criminal actors” who have laundered illegal drug proceeds and conspired with J.P. Morgan Chase Bank in depositing such funds and violating federal law. The lawsuit also asserts that the marijuana taxes are excessive, as Amendment 64 to the Colorado Constitution forbid any regulation that would make the operation of a marijuana enterprise “unreasonably impracticable.”
Colorado voters approved Amendment 64, legalizing recreational marijuana, in November 2012, and legal sales began January 1, 2014.