St. Louis Forgot To Tax Recreational Pot Sales

Passing a joint St. Louis
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ST. LOUIS — City officials missed the deadline to begin taxing recreational marijuana sales this fall, leaving hundreds of thousands of dollars on the table.

St. Louis was supposed to start charging a 3% levy in October. But until about a week ago, no one had filed paperwork with the state to turn on the spigot. And now, per state regulations, city officials will have to wait until January.

Early estimates suggest the city could lose between $500,000 and $600,000 to the mistake.

That won’t break the city’s billion-dollar budget. But Alderwoman Cara Spencer, who chairs the aldermanic budget committee, said it’s not inconsequential, either: That kind of money could cover the cost of a proposed freeze on senior property taxes for a year.

“It’s really disappointing,” Spencer said. “We need every dollar we can get.”

City spokesman Nick Dunne said Mayor Tishaura O. Jones and her staff got the issue resolved within a couple of days last week. Dunne said the mayor’s office is also taking steps to prevent similar problems in the future.

“Clearly, this is an oversight that even we weren’t thrilled with,” Dunne said.

The new tax was advertised to voters earlier this year as a way to combat historic inequalities in a city long divided between north and south, and Black and white. The ordinance that put the tax on the April ballot suggested the money could help struggling residents get access to education or job training. Former Alderman Brandon Bosley, who sponsored the ordinance, said he hoped the money would go toward giving at-risk young people things to do to keep them out of trouble amid rising concerns about juvenile crime.

That was good enough for voters, who gave City Hall the green light in early April. But there was one more step after that: The city needed to formally notify the state Department of Revenue of its plans to impose a new levy and provide some documentation, such as the certified election results and the text of the enabling ordinance.

State rules said new local marijuana taxes could take effect on the first day of the second quarter after the state receives notifications. If the city got its paperwork done by June 30, the state could’ve started collecting the tax in October.

But that didn’t happen, and no one at St. Louis City Hall raised any alarm until last week, when a city finance employee alerted the mayor’s office last Monday.

“We’re grateful that they told us because we had no idea,” said Dunne, the mayor’s spokesman.

Dunne said Jones and Casey Millburg, Jones’ policy director, moved quickly to solve the problem once they found out. Both Jones, a former state representative, and Millburg, a former aide to statehouse Democrats, have connections in Jefferson City, Dunne said, and they used them.

They filed relevant paperwork with the Department of Revenue on Tuesday and had confirmation Wednesday that all was in order. They also secured a waiver from the state to impose the tax in January rather than April, as regulations prescribed, meaning the city will lose three months of revenue rather than six.

Dunne did not offer an estimate of how much the city expects to lose in those three months, but in a budget hearing in May, Budget Director Paul Payne told aldermen that if statewide recreational sales are about $1 billion per year as projected and the city takes in the same share in taxes as it does with other consumer spending, annual revenue would be $2.4 million per year, or $600,000 per quarter.

If the city’s market share is equal to its share of the dispensaries that have opened so far across the state, annual revenue would be roughly $2 million per year, or $500,000 per quarter.

It’s not clear exactly whose job it was to file the paperwork. The mayor’s office has handled recent submissions. But Dunne said the city comptroller’s office and the Board of Elections have also handled such submissions in the past.

Gary Stoff, one of two city elections directors, sent one to the state in 2008. He said Monday he didn’t recall sending it, and doubted the board had sent any others since.

The comptroller’s office did not respond to a request for comment.

“We are looking at what we can do to more clearly define lines of responsibility,” Dunne said.