Judge Strikes Down Cumulative Fees on Montana Marijuana Dispensaries

The cumulative fee structure passed in the final two weeks of the session through an amendment to House Bill 903

By Blair Miller, Daily Montanan
A jar filled with marijuana flower at a dispensary in Whitefish on May 17, 2022. Hunter D’Antuono | Flathead Beacon

A judge in Helena last week struck down a newly passed cumulative fee on marijuana dispensaries in Montana that a group of dispensaries sued over last year.

Lewis and Clark County District Court Judge Mike Menahan issued the order Jan. 5 to permanently enjoin the state from enforcing or collecting on the new fees passed by the state Legislature this spring, which were challenged by Granite Peak Holdings, TSB Montana and MariMint – all Montana marijuana businesses.

Attorneys for the three dispensaries and the state had agreed in November to a 60-day preliminary injunction that kept the state from collecting the new fees, as the businesses argued they would be forced to close several locations and lay off workers if they were enforced.

Republicans passed the cumulative fee structure in the final two weeks of the session through an amendment to House Bill 903. Previously, each dispensary site carried a license fee of $5,000 no matter how many sites the business owned.

Under the changes in HB 903, a first dispensary location cost a business a $5,000 annual fee, but each additional business carried a cumulative increase of $5,000, meaning a second would cost $10,000 and a third $15,000. The final version of the bill passed on the final day of the legislative session in a 49-47 vote in the House.

The dispensaries that sued the state over the added fees argued that the additional fees that the state stood to collect under the new law were illegal because the Department of Revenue cannot impose fees or taxes beyond what is necessary to regulate the Montana marijuana industry.

The state had previously argued that Montana’s vast land mass meant the department needed extra money to regulate the industry and that the marijuana businesses could simply choose to open fewer dispensaries if they didn’t want to pay the additional fees.

“Logic dictates that if a fee of $5,000 for a new location is going to make or break that location, then it is not a profitable location and should not be opened in the first place. Plaintiffs just want to make more money at the expense of the taxpayers,” the state’s attorneys had argued in an October filing.

In the consent judgment signed by Menahan on Friday and agreed to by each side, the document said Granite Peak would have been assessed $280,000 in renewal fees for its 10 existing locations — up from $50,000 under the old law — and an additional $245,000 for four new locations.

TSB’s fees would have increased from $75,000 to $600,000, while MariMint’s would have gone up to $75,000 from $25,000 under the old law.

In November, Menahan issued the 60-day preliminary injunction blocking the fees from being collected while registrations and renewals were coming due, and put the old fee structure in place while saying the Department of Revenue should return any fees collected under the new structure should the new provisions of law be struck down permanently.

In Friday’s order, he permanently blocked the new cumulative fee structure and ordered the $5,000-per dispensary fee that existed prior to the 2023 legislative session remain the status quo.

He also ordered the department to refund any excess fees any dispensaries had paid, and dismissed other parts of the lawsuit that challenged portions of HB 903, which will remain in effect.

Menahan found that the cumulative fees generate “more fees than is necessary” to cover the Department of Revenue’s costs for enforcing the Montana Marijuana Regulation and Taxation Act, and found the $5,000 fee per dispensary “generated sufficient fees to cover the costs to the Department.”

This story originally appeared in the The Daily Montanan, which can be found online at dailymontanan.com.

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