Missouri Appeals Court Considers Local Governments’ Authority to Stack Sales Taxes on Marijuana

October 9, 2024

The court debate Tuesday over how Missouri marijuana products get taxed statewide sounded similar to a grammar class on conjunctions and comma placement.

The constitutional amendment voters approved in 2022 legalizing recreational marijuana allowed local governments to impose additional sales tax on the products.

The big question before the three-judge panel of the Missouri Court of Appeals Eastern District on Tuesday was: what did voters intend by “local government?”

Attorneys for St. Louis and St. Charles counties argued the word “and” is key in the definition laid out in the constitutional amendment.

It states that “local government” means, “in the case of an incorporated area, a village, town, or city; and, in the case of an unincorporated area, a county.”

The counties asked the appellate judges to uphold a lower court’s interpretation in May that both a county and a local municipality can impose a 3% sales tax at dispensaries in their jurisdictions.

However, Florissant-based dispensary Robust Missouri 3 LLC argued that the comma placement is key.

“While ‘and’ typically functions as a conjunction, here it connects two distinct clauses—one for incorporated areas and one for unincorporated areas — under the framework of ‘in the case of,’ which delineates separate alternatives,” states Robust’s reply brief.

Attorneys for Robust said Tuesday that voters didn’t intend for two local governments – in its case, St. Louis County and the City of Florissant — to both add taxes, resulting in a 14.988% sales tax rate.

Attorney Paul Brusati speaks with fellow attorneys for Robust Missouri following a Court of Appeals hearing on Tuesday (Rebecca Rivas/Missouri Independent).
To put that in perspective, the highest adult-use marijuana sales tax in Missouri is in Florissant’s neighboring cities of Hazelwood and St. Ann, with 17.988%.

Looking beyond the grammar, appellate judges asked about the possibility of “absurd outcomes” that St. Louis County Circuit Judge Brian May wrote about in his ruling if the court accepted Robust’s definition of local government.

May wrote that if Robust’s interpretation of the amendment were accepted, “then a municipality or city would essentially be given carte blanche to ignore any county ordinance or regulation, including those related to public health and safety wholly unrelated to the taxing issue.”

May was largely talking about public health regulations because public health in Florissant is regulated by St. Louis County.

On Tuesday, Judge Robert Clayton asked Robust’s attorney Eric Walter: “If we accept your definition, all those county regulations or everything else will be no longer applicable on these particular types of businesses.”

Walter replied that the Missouri Department of Health and Senior Services, the state agency tasked with regulating cannabis businesses, requires “that you’re compliant with all the local government regulations.”

Both attorneys for the counties and Robust declined to comment on Tuesday’s hearing.

Following May’s ruling, the Missouri Association of Counties executive director Steve Hobbs said the association has strongly advocated that counties have the ability to do levvy their own taxes.

“The bulk of the counties around the state had gone to the voters and asked them to implement this tax,” Hobbs told The Independent in May. “And I think every one of them approved of it. I think [the ruling] removes some uncertainty from those counties.”

On the other side, leaders of the marijuana industry have called the effort to collect both taxes an “unconstitutional money grab” that violates the terms of the amendment.

Jack Cardetti, spokesman for the Missouri Cannabis Trade Association said the appellate judges Tuesday seemed “very prepared and well versed on the issue.”

“Obviously much of the discussion centered around the definition of local government in Missouri’s Constitution, which we saw as a good sign,” Cardetti said. “As we enter year two of Missouri cannabis consumers paying roughly $3 million more each month than they should, we hope to bring customers relief as quickly as possible.”

A similar appeals case out of Buchanan County is also pending.

St. Joseph dispensary Vertical Enterprises sued Buchanan County Collector Peggy Campbell, arguing that it, too, would be “irreparably harmed” if both taxes were imposed.

Also in May, Circuit Judge Daniel Kellogg ruled that the marijuana law does not limit the taxing power of counties within corporate limits of towns and cities.

A hearing date for this case has not yet been set.

Sources