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Why Colorado Is Waiving Taxes on Recreational Marijuana for One Day

2 minute read

Because of its unusual sales tax law, Colorado will have to waive taxes on recreational marijuana on Sept. 16, the Associated Press reports.

Voters approved a 25% tax on recreational pot back in 2013, a year after it was legalized. Colorado law states that if overall state tax collections surpass projections, the new tax will be waived and refunded. The state estimated that recreational marijuana would bring in $70 million in taxes. It actually brought in only $58 million, but because the overall tax collection exceeded estimations, the law still applies. This one-day waiver will allow taxes to revert to zero.

Despite the sales-tax holiday, marijuana won’t be completely tax free. The 25% tax on recreational marijuana will be waived, but the regular 2.9% sales tax, medical marijuana taxes, and local marijuana taxes will still apply. An ounce of mid-grade marijuana will cost $20 less than it normally would.

This tax waiver could potentially cost the state between $3 million and $4 million, but it won’t affect the state’s overall revenue too much. In the first five months of 2014, marijuana tax revenues were at $25 million; that number jumped up to $44 million in the first five months of this year.

The state plans to reduce taxes on marijuana to 8% by 2017.

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