Marijuana, I am sure you will be surprised to learn, appears to be pretty popular with tourists. Colorado’s Department of Revenue is out with an interesting new report that estimates statewide demand for legalized cannabis, which concludes that out-of-towners will consume 8.9 metric tons of the drug in 2014. That’s but a dime bag compared to the 121.4 metric tons locals will purchase. However, those state natives are still mostly buying medical pot. When it comes to the retail sales that have grabbed the country’s attention, visitors are driving much more demand. From the report (emphasis added):
Using a combination of sales tax receipt information, point-of-sale statistics, and data from county tourist offices, it is possible to impute visitor demand. For example, we estimate that purchases by out-of-state visitors currently represent about 44 percent of metro area retail sales and about 90 percent of retail sales in heavily visited mountain communities. Visitor demand is most prevalent in the state’s mountain counties, where combined medical and retail marijuana sales more than doubled after retail sales were legalized in January, 2014. In comparison, Front Range metropolitan combined sales only increased between 15 and 19 percent over the same period.
To repeat, tourists may be responsible for 90 percent of retail marijuana sales in resort towns, and nearly half in major metro areas.
For legalization advocates in Colorado, those interlopers may be a godsend. As Walt Hickey has written at FiveThirtyEight, part of the sales pitch for legalizing marijuana was that it would be a whole new source of tax revenue. Indeed, the state collected about $4.8 million worth of marijuana sales taxes in June, largely thanks to retail pot, which is taxed at a higher rate than medical sales.
However, this raises an interesting question. If so much of the demand is coming from tourists, you have to wonder: What will happen if other states follow Colorado’s lead and legalize? Presumably, it would mean fewer visitors generating fewer sales taxes. Inadvertently, then, Colorado may be demonstrating the limits of retail weed as a tax source, at least when locals can still get a medical card with relative ease.