Collections of marijuana sales tax lagging in Springfield 

David Holtmann: Department of Revenue has not yet explained why the collection rate is so low. 

Collections from the city of Springfield’s 3% sales tax on adult-use marijuana are lagging, City Council members learned at their weekly luncheon April 30. 

The tax, which was approved by voters in August 2023 and went into effect Jan. 1, had originally been estimated to bring in $1.6 million-$2.2 million annually, but the first two months of collections have yielded only $189,000, according to David Holtmann, director of finance for the city. If that level of collections were to stand, the tax would bring in slightly over $1.1 million for the year. The city’s revised projection is $1.8 million, Holtmann said. 

Holtmann said collections are not being submitted by some of the city’s dispensaries. 

“Out of our 12 retail providers, we’re seeing several that we have not had any collections on,” he said. 

He said depending on the month, five or six of the retailers remitted recreational taxes, while eight dispensaries had remitted the city’s regular 1% sales tax, assessed on both adult-use and medical marijuana. 

Holtmann said he had reached out to the Missouri Department of Revenue to try to understand what the potential issues are for reporting the tax, but there was no response by the time of the meeting. 

Springfield Business Journal also contacted the Department of Revenue on May 1 to inquire about the lag in collections, and a spokesperson replied by email that she was looking into it. A response was not received by deadline. 

Flora Farms LLC, the area’s largest operator of dispensaries, according to SBJ list data, is collecting and paying adult-use sales tax, according to President Mark Hendren. Asked if he had heard any industry talk about why some other dispensaries aren’t paying, he said he had not. 

Hendren did note that elsewhere in Missouri, some operators are concerned about city and county taxes being stacked, with cities and counties both charging up to a 3% tax on adult-use weed; however, Greene County has not levied a tax on cannabis. 

Original tax revenue estimates were based on the level of medical marijuana sales in the city, but adult-use sales have far outpaced medical marijuana sales. In 2023, the Missouri Department of Health and Senior Services reported $1.04 billion in adult-use sales. This is out of a combined adult-use and medical sales total of $1.3 billion, according to DHSS. 

Voters approved four uses for the tax revenue: public safety, substance abuse services, housing and mental health services.  

Budgeted from the tax is $363,000 in staff time and operating supplies and services to reinstate the jail diversion program, a collaborative effort of the Springfield-Greene County Health Department and the Springfield Municipal Court, scheduled for a vote by council at its meeting on May 6. 

Also budgeted are $150,000 in supplies and services for a virtual real-time crime center and $94,050 for a gun violence reduction/prevention action plan through the Springfield Police Department. 

That leaves $1.2 million budgeted in reserves to be allocated by council at a later date, according to Holtmann’s presentation. 

Equal split proposed 
Councilmember Monica Horton suggested an equal percentage of proceeds be split among the four areas that are to be funded through the 3% adult-use sales tax. Each category would receive 25% under this proposal. 

“I just feel like that creates some stability in terms of what we can expect to apply, whatever the revenue amount is,” she said. 

She added that proposals for the use of the entire budgeted amount had already been received. 

“Right now, it feels very unstable in terms of the demand that’s being placed on the marijuana tax, whether it’s between public safety or housing or what have you,” she said. “We need to push the rewind button.” 

At the time the tax was proposed, council rejected the idea of an equal split; that way, council would have the flexibility to respond to needs that arise, according to past SBJ reporting. 

Mayor Ken McClure said he would be proposing a measure to move that decision to council’s Finance and Administration Committee. He noted that some proposals touch on multiple funding categories, and the committee can come up with criteria. That’s what committees are designed to do, he said. 

Horton said council could make that decision immediately as a whole. 

“I think we can just make the decision here,” she said. 

Councilmember Craig Hosmer agreed, noting that if the measure goes to committee, five members of council are left out of the process. 

He added that he was eager to learn whether the failure to collect from some of the city’s dispensaries is a reporting problem or a compliance problem. 

“I don’t think we’re capable of allocating anything because we don’t have the numbers,” he said.