A provision in HB1409 will redirect local marijuana tax revenue to the state beginning next summer—and most retail owners haven't heard about it yet.
Most Colorado retail owners don't realize that starting July 1, 2026, their city or county will stop receiving a direct share of marijuana tax revenue generated within their boundaries. That money will go to the state instead. For retailers in towns that have relied on that local funding for public services, infrastructure, and regulation, this change could have real consequences.
Under current law, local governments receive 3.5% of the gross retail marijuana special sales tax revenue collected within their jurisdiction. This money has funded everything from local enforcement to community programs. HB1409 eliminates that local share entirely, effective July 1, 2026, redirecting all of it to state funds.
The change is permanent—there is no sunset date or planned review. Once it takes effect, the formula that previously distributed revenue proportional to local marijuana sales will no longer exist. Cities, towns, and counties will receive zero percent of that 3.5% share going forward.
There is a one-year transition period: July 1, 2025 through June 30, 2026. During that window, the current 3.5% local distribution continues. Beginning July 1, 2026, the new formula takes effect and local governments lose access to that revenue stream entirely.
Every retail location in Colorado is affected, but the impact varies by location. Retailers in smaller towns and counties that have depended on marijuana tax revenue to fund local services—licensing, inspections, local law enforcement coordination, or community programs—may see those services scaled back or eliminated. Some municipalities may respond by raising other local taxes or fees. Larger cities with more diversified revenue sources may absorb the loss more easily, but all local governments lose discretionary funding they previously counted on.
The provision is found in Section 1, page 2 of HB1409, which adds subsection (1)(b)(I.7) to Colorado Revised Statutes 39-28.8-203.
If your local government has been using marijuana tax revenue to fund regulatory programs, compliance support, or infrastructure improvements that benefit your business, you may want to pay attention to how your city or county plans to respond. Some municipalities may need to find new funding sources or reduce services. Others may advocate for alternative state funding or policy changes.
The change doesn't affect the tax rate you pay—only where that money goes. But it does affect the local environment in which you operate. Staying informed about your municipality's budget discussions over the next year is worth your time.
For a detailed breakdown of how HB1409 affects local marijuana tax distributions and what questions to ask your local government, contact your local chamber of commerce or retail trade association.