A provision in HB1409 will redirect marijuana tax revenue away from local governments beginning next summer—and most retail owners haven't heard about it yet.
Most Colorado retail owners don't realize that a change buried in HB1409 will eliminate a funding stream that, while indirect, has supported the local infrastructure and services their businesses depend on.
Here's what's happening: Beginning July 1, 2026, Colorado will stop sending 3.5% of gross retail marijuana sales tax revenue to local governments. That money will instead flow entirely to state funds. This is a permanent change with no sunset date.
If your marijuana retail location is in any Colorado municipality or unincorporated county area, your local government currently receives a share of marijuana tax revenue based on sales within that jurisdiction. That ends on July 1, 2026.
Cities and counties have used this revenue to fund local regulatory programs, licensing administration, public health initiatives, and other services that indirectly support retail operations. Once the change takes effect, those funds will no longer be available locally.
There is a one-year transition period. From July 1, 2025, through June 30, 2026, local governments will continue to receive their 3.5% apportionment under the current rules. On July 1, 2026, the provision becomes permanent and the local share disappears entirely.
This means local budgets will feel the impact starting in fiscal year 2026–27.
Local governments use marijuana tax revenue to pay for:
When that funding disappears, local governments may face budget pressure. Some may respond by raising local licensing fees, reducing services, or cutting back on regulatory support. Others may seek new revenue sources. The exact impact will vary by jurisdiction, but retail owners should expect some form of adjustment.
Start paying attention to your local government's budget discussions, especially in late 2025 and early 2026. Ask your city or county whether they're planning to offset the lost marijuana tax revenue through fee increases or service changes. If you're part of a retail association or chamber of commerce, flag this issue now so your industry voice is part of the conversation before decisions are made.
The legal authority for this change is found in HB1409, Section 1, page 2, which adds subsection (1)(b)(I.7) to Colorado Revised Statutes 39-28.8-203.
For a detailed breakdown of how this may affect your specific location and operations, speak with your local government affairs representative or business advisor.