Staff recommends approval of the ordinance.

Staff further recommends the City Council delay the second reading of this ordinance to the Regular Meeting on January 17th and schedule a presentation to be made at the January 9th Study Session to gather input on this item.

On November 8, 2022, Missouri voters approved Amendment 3 to legalize the recreational use of marijuana. The amendment authorizes cities, after approval 
by voters, to impose an additional 3% sales tax on all tangible personal property retail sales of adult-use marijuana. The question to impose the tax may be placed on a ballot for a general, primary or special election. The first opportunity for cities to impose the additional adult-use marijuana sales tax is the April 2023 election. Certification of ballot questions for the April 2023 election must be done by Jan. 24, 2023. 

Should a city impose the 3% local sales tax, the sales tax is collected by the Department of Revenue like other sales taxes imposed by cities.

If approved by the registered voters of Independence, Missouri, this measure would impose a Marijuana Sales Tax at the rate of three percent of the receipts from the sale at retail of adult use marijuana within the City of Independence, Missouri. Based on three different methodologies, staff estimates this tax would yield between $270,000-$615,000 annually with additional growth expected. It should be noted this represents the amount captured by an additional 3% sales tax and is independent of the Local Option Sales Tax and other dedicated voter-approved sales taxes totaling 2.625%.

The lower-range estimate was calculated by City staff using estimated gross receipts and based on amounts remitted to the Missouri Department of Revenue at the four medicinal marijuana dispensaries operating in Independence. Applying a 3% sales tax against these gross receipts would yield approximately $270,000 in annual revenue. 

A middle-range estimate was calculated using data from the one-percent Local Option Sales Tax currently being levied on medicinal sales in 2022. In this scenario, the City would have received an additional $333,466 from January through October receipts (with two more months to report). By averaging the 1% tax staff concluded the City is receiving approximately $12,219 monthly. Based on this amount and projecting medical marijuana receipts for 2023, over a 12-month period at 3%, the City would generate an additional $440,000. 

The higher-range estimate was provided by the Missouri Municipal League (MML). MML notes that there are approximately 190 medicinal marijuana dispensaries currently operating within Missouri, with up to about 205 dispensaries expected to be operational by November 2023. Presently, the average dispensary is grossing about $184,000 per month. Statewide, monthly revenues are currently $87.5 million from marijuana sales. The average dispensary will gross an estimated $427,000 each month.  A 3% tax on those sales will generate $12,805 each month and $153,660 annually. MML expects that the market will continue to grow for at least the next few years. This calculation assumes an equal revenue stream from each dispensary across the state. In reality, amounts would likely vary from location to location. With four dispensaries currently in operation, this calculation would yield $614,640 annually for Independence.