ST. LOUIS — The Missouri Court of Appeals recently ruled in favor of Robust Missouri Dispensary 3 overturning a circuit court decision that allowed St. Louis and St. Charles Counties to impose additional retail sales taxes on marijuana dispensaries operating within incorporated areas of the counties.
The court ruled counties cannot double-tax dispensaries in incorporated areas.
This ruling has significant implications for local taxation of the growing marijuana industry, particularly in incorporated municipalities, according to the Nov. 12 court opinion.
In its decision, the court focused on Article XIV of the Missouri Constitution, which governs the state's legal marijuana framework.
The provision allows local governments to impose a sales tax of up to three percent on adult-use marijuana sales, but it defines "local government" based on the area's incorporation status.
Specifically, it states that "local government" means "a village, town or city" for incorporated areas, while for unincorporated areas, "local government" refers to the county.
The court found this definition was unambiguous and precludes counties from taxing marijuana sales within incorporated municipalities, such as Florissant in St. Louis County, where Robust operates.
The controversy arose after Missouri voters approved an amendment in 2022 to legalize recreational marijuana.
This amendment established a taxation system, including a 6% state tax on non-medical marijuana sales, with the option for local governments to add their own 3% tax through voter approval.
In April 2023, Florissant's residents voted to impose this tax, as did voters in St. Louis County.
However, when Robust received a letter from the Missouri Department of Revenue in October 2023 stating it must also remit the county-imposed tax, it filed a legal challenge.
Robust argued that under Article XIV, counties are not authorized to impose additional sales taxes on dispensaries within incorporated areas.
The company contended that only the incorporated municipality has taxing authority in such cases. St. Charles County, which had also passed a marijuana tax proposition, joined the case, supporting the counties' right to impose the tax regardless of whether dispensaries were in incorporated areas.
The circuit court originally sided with the counties, asserting that the definition of "local government" in Article XIV should include counties even within incorporated areas.
It reasoned that limiting counties' taxing power would lead to an "absurd" interpretation.
However, the Missouri Court of Appeals found this reasoning flawed, emphasizing that the constitutional text clearly distinguishes between incorporated and unincorporated areas. Allowing counties to impose taxes within incorporated areas, the court said, would render parts of the constitutional provision meaningless.
The appellate court's decision clarifies that counties do not have the authority to collect additional taxes from dispensaries within incorporated municipalities.
The court underscored that only one local government entity — in this case, the municipality — may impose the additional 3% tax authorized under the constitutional amendment.
This decision also highlights a broader issue concerning local taxation authority in Missouri's evolving marijuana industry.
The court's interpretation ensures that dispensaries in incorporated areas are not subjected to overlapping taxes from multiple local governments, which could complicate compliance and increase costs for businesses.
The ruling carries significant implications for marijuana dispensaries across Missouri, providing clarity on which entities can impose taxes and potentially shaping future legal disputes involving the interpretation of constitutional amendments.
Moving forward, counties seeking to tax marijuana sales within their geographic boundaries must adhere strictly to the constitutional distinctions regarding incorporated and unincorporated areas.
With this ruling, the Missouri Court of Appeals reversed the lower court's decision and enjoined St. Louis and St. Charles Counties from collecting additional retail taxes on marijuana dispensaries within incorporated municipalities, affirming that the constitutional text "unambiguously" limits such taxation to the local municipality.
Eric Walter represented the appellant.
Laura M. Robb, Lindsey C. Bachman and Robert E. Hoeynck, Jr. represented the respondents.
Attorneys declined to comment on the matter.
Missouri Court of Appeals, Eastern District case number: ED112642