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Sales Tax on Pot … and Other Election Results

This week’s election covered several initiatives on sales tax. For a look at the latest stories, here’s what happened across the country at the ballot box:

According to the Denver Post, Colorado voters approved a “special excise and sales tax on recreational marijuana” – a substantial tax that is roughly 20% on most products. The state legalized the drug back in May, when regulatory laws were passed to govern its sale and usage. This November, Portland, Maine legalized pot for adults and two other cities decriminalized it. Proponents of legalizing marijuana have long argued could generate an abundance of tax revenue. Time will tell how much additional income this will bring to Colorado and whether or not the state will be the first of many to legalize the drug to bring in revenue.

While that may be the most intriguing news about yesterday’s elections, across the country, sales tax increases were also on the ballot.

Priorities differ for two California towns. In Stockton, CA, voters opted to increase their sales tax to 9%, with most of that new revenue going to support increased law enforcement. This could be an indicator of economics in the region improving – or not. If residents believe that state run services such as law enforcement are suffering enough to raise taxes, they may be still feeling the pinch of the recession and the after-effects of October’s government shutdown. The question is whether these increases will hurt sales.

Meanwhile, nearby Modesto, CA voted down a 1% sales tax increase. Similar votes happened all over the country with split results like these. If Modesto is rejecting a modest increase, could that indicate that budgets are still tight? We can be certain economists will be keeping a close eye on holiday sales.

In Jackson County, MO, voters rejected a half-cent increase in sales taxes to fund medical research for two private hospitals. The tax could have provided up to $40 million annually for “translational research,” that is, research done to create products and practical applications such as pharmaceuticals and treatments. The measure was voted down by 84% of the electorate. While many voters claimed to support the research, they do not believe that a sustained tax increase (20 years) is the way to fund it and worry it could set a bad precedent.

As analysts wrestle with the results of these tax changes over the next few weeks, ecommerce vendors need to take note of any changes in their local sales taxes. Check your region’s election results to see if any increases – or decreases or new regulations – occurred that will affect your business in the next tax season. If sales tax has gone up or down, you’ll need to know when these changes take effect and have your web professional adjust your software accordingly. In addition, extra sales tax could play havoc with your bottom line, so now is the time to reconsider how that figures into costs and pricing for the new year. It’s wise to make an extra effort for holiday sales and promotions to provide a cushion for the upcoming tax season.

Hopefully, you haven’t been affected by any increases, but if you have, let’s take it as a good sign that consumers are feeling confident enough in their finances to pay a little more for that product they want.

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