Court Debate Over Missouri Cannabis Tax Law Hinges on Grammar

The court debate Tuesday over how Missouri marijuana products get taxed statewide sounded more like a grammar class than a legal proceeding. At the heart of the issue is the precise meaning of words, conjunctions, and punctuation in the constitutional amendment that legalized recreational marijuana in the state. This question over wording is now pivotal in determining how local governments in Missouri are allowed to impose additional sales taxes on marijuana products.

The constitutional amendment in question, which was approved by voters in 2022, permits local governments to collect extra sales tax on cannabis products. However, the language in the amendment has spurred a legal dispute about the specific entities eligible to levy these taxes.

The Missouri Court of Appeals for the Eastern District heard arguments from attorneys for St. Louis and St. Charles counties, who argued that the issue comes down to how the word “and” is used in the amendment. They contended that the seemingly simple conjunction could have significant implications for the taxation of marijuana in different areas across the state.

The Voter-Approved Constitutional Amendment

In 2022, Missouri voters approved a constitutional amendment to legalize recreational marijuana for adults aged 21 and over. Along with legalization, the amendment allowed for the regulation and taxation of marijuana, including a provision that permits local governments to impose their own additional sales tax on marijuana products.

The intent behind this provision appears straightforward—local governments in Missouri should have the authority to add their own tax to marijuana products sold within their jurisdiction. However, the ambiguity arises from the precise meaning of “local government” and the grammatical relationship between the terms “and,” “village,” “town,” “city,” and “county.”

The central question debated in the courtroom was: what did voters really intend when they approved the term “local government”?

The Role of Conjunctions and Commas

Attorneys for St. Louis and St. Charles counties argued that the meaning of the word “and” in the sentence is critical to determining which local governments are allowed to impose the tax. They explained that in the case of an incorporated area, only villages, towns, or cities can impose a local sales tax. Meanwhile, for unincorporated areas, counties can do so. According to their interpretation, this distinction sets up two different sets of local governments depending on whether an area is incorporated or unincorporated.

Their argument rested heavily on the placement of the conjunction “and” and the comma that precedes it, which they say separates the two different clauses of the amendment.

County vs. City: Who Gets to Tax?

The crux of the dispute is whether counties have the authority to tax marijuana in incorporated areas, such as cities, or if their power is limited only to unincorporated regions. If the court interprets the amendment as giving counties the right to tax in incorporated areas, cities may face the prospect of overlapping taxes from both county and municipal governments. However, if counties are restricted to taxing only in unincorporated areas, cities would retain more control over taxation within their borders.

Attorneys representing St. Louis and St. Charles counties maintained that the language clearly allows for counties to tax marijuana in both incorporated and unincorporated areas. They pointed out that the word “and” is used to distinguish between two separate jurisdictions where the tax could be applied, and that it was not meant to exclude counties from taxing in incorporated cities.

“The conjunction ‘and’ ties these clauses together, allowing both levels of government to act,” said one attorney representing the counties. “It gives counties the ability to impose taxes in incorporated areas, where municipalities like cities also exist.”

Opposing Interpretations

On the other side of the argument, opponents—particularly those representing city governments—disagreed with this interpretation. They contended that counties should only have the right to tax in unincorporated areas, where no city or town government exists. According to their reading of the amendment, the conjunction “and” implies a separation of powers, with incorporated areas governed by city governments and unincorporated areas falling under county jurisdiction.

This distinction, they argued, was designed to prevent double taxation—where both a city and a county could levy separate taxes on the same product, creating a potentially burdensome tax environment for marijuana businesses and consumers.

Judges Seek Clarity in Interpretation

The three-judge panel of the Missouri Court of Appeals seemed to wrestle with these competing interpretations of the constitutional amendment. Throughout the arguments, the judges probed both sides about how they arrived at their respective readings of the text and what practical implications their interpretations would have for marijuana taxation across the state.

One judge remarked that while the amendment’s intent may seem clear in theory, the wording leaves enough room for different interpretations, which has led to this legal challenge. Another judge questioned whether the drafters of the amendment had adequately thought through the consequences of their language choices, given the complexity of taxation laws and the patchwork nature of local governance in Missouri.

Potential Impact on Consumers and Businesses

The outcome of this case could have significant financial implications for marijuana businesses and consumers in Missouri. If the court rules that counties have the right to impose taxes in incorporated areas, marijuana businesses operating in cities could face higher overall tax burdens, which may be passed on to consumers in the form of higher prices.

Conversely, if the court sides with the cities and restricts counties to unincorporated areas, cities would retain greater control over their local tax rates, potentially preventing the imposition of overlapping taxes.

A Decision Awaited

The Missouri Court of Appeals did not issue a ruling at the close of Tuesday’s session, but the case is expected to set a precedent for how marijuana is taxed at the local level in Missouri going forward. Legal experts anticipate that the court’s decision could clarify the scope of local government powers under the state’s marijuana legalization framework and potentially reshape the fiscal landscape for both municipalities and counties.

In the meantime, marijuana businesses and consumers alike are watching the proceedings closely, waiting to see how the court will navigate this grammatical debate that could have far-reaching consequences for the state’s burgeoning cannabis industry.