With respect to rules promulgated under Article 28.8 of Title 39, the following terms have the following meanings.

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1 DEPARTMENT OF REVENUE Taxpayer Service Division - Tax Group RETAIL MARIJUANA TAX 1 CCR [Editor s Notes follow the text of the rules at the end of this CCR Document.] DEFINITIONS With respect to rules promulgated under Article 28.8 of Title 39, the following terms have the following meanings. (1) Unless the context clearly requires otherwise, terms defined by section , C.R.S. or in Rule R 103 of 1 CCR 212-2, the Marijuana Enforcement Division s rules related to the Colorado Retail Marijuana Code, shall have the same meanings in these rules as therein defined. (2) "Average Market Rate" shall have the same meaning as defined in subsection (1), C.R.S., and shall be calculated pursuant to Department Rule (2) in the following categories: (a) Bud (b) Trim (c) Immature Plant (3) "Bud" means the product of the "Flower" or "Flowering" stage as defined by Rule R 103 of 1 CCR including the actual flower and the small leaves immediately below the actual flower which contain levels of THC comparable to the Flower. These leaves are commonly known as "sugarleaf." (4) "Concentrate" means "Retail Marijuana Concentrate" as defined in Rule R 103 of 1 CCR (5) "Immature Plant" shall have the same meaning as set forth by Rule R 103 of 1 CCR (6) "Marijuana" means Medical Marijuana or Retail Marijuana. (7) "Medical Marijuana" shall have the same meaning as set forth by Rule R 103 of 1 CCR (8) "Medical Marijuana Business" shall have the same meaning as set forth by Rule R 103 of 1 CCR (9) "One-Time Transfer" means the act of declaring and converting Medical Marijuana or Medical Marijuana-Infused Product to Retail Marijuana or Retail Marijuana Product in accordance with subsections (1)(a)(III) and (IV), C.R.S. and Rule R 211, 1 CCR This conversion may occur only one time when a Medical Marijuana Business adds a Retail Marijuana Establishment license or converts to a Retail Marijuana Establishment license.

2 (10) "Retail Marijuana" shall have the same meaning as set forth by Rule R 103 of 1 CCR (11) "Retail Marijuana Cultivation Facility" shall have the same meaning as set forth by Rule R 103 of 1 CCR (12) "Retail Marijuana Excise Tax" means excise tax due under Article 28.8 of Title 39, C.R.S. (13) "Retail Marijuana Excise Tax Return" means the excise tax return upon which all sales or transfers of retail marijuana subject to the excise tax and the amount of Retail Marijuana Excise Tax is reported. (14) "Retail Marijuana Sales Tax" means sales tax collected and due under Article 28.8 of Title 39, C.R.S. (15) "Retail Marijuana Sales Tax Return" means the sales tax return upon which all sales of Retail Marijuana Products and the amount of state and local Retail Marijuana Sales Tax is reported. (16) "Retail Sales Tax" means the sales tax collected and due under part 1 of Article 26 of Title 39, C.R.S. (17) "Retail Sales Tax Return" means the sales tax return upon which the amount of state sales and state-administered local jurisdictions sales tax imposed, collected, and due under part 1 of Article 26 of Title 39, C.R.S. is reported. (18) "Test period" means: (a) With respect to sales made between January 1, 2014 and June 30, 2014, the Test Period shall be 2012 and (b) With respect to sales made between July 1, 2014 and December 31, 2014, the Test Period shall be January 1, 2014 through April 30, (c) With respect to sales made after January 1, 2015, the Test Period for the calculation of the Average Market Rate shall be each November 1st to the subsequent April 30th, and each May 1st to the subsequent October 31st. (19) "Transfer" means to grant, convey, hand over, assign, sell, exchange, or barter, in any manner or by any means, with or without consideration, any Retail Marijuana or Retail Marijuana Product from one licensee to another or to a consumer. A Transfer includes the movement of Retail Marijuana or Retail Marijuana Product from one licensed premises to another, even if both premises are contiguous, and even if both premises are owned by a single entity or individual or group of individuals and also includes a virtual transfer that is reflected on the Marijuana Inventory Tracking Solution ("MITS") system, even if no physical movement of the Retail Marijuana occurs. (20) "Trim" means any part other than the Bud of a Retail Marijuana plant other than an Immature Plant that is sold to a Retail Marijuana Store, a Retail Marijuana Products Manufacturing Facility, or a Retail Marijuana Cultivation Facility. (21) "Unprocessed Retail Marijuana" means all Retail Marijuana that is sold or Transferred by a Retail Marijuana Cultivation Facility, even though it may have gone through some processing, and even though it may be subject to further processing by a Retail Marijuana Products Manufacturing Facility, another Retail Marijuana Cultivation Facility, or a Retail Marijuana Store. RETAIL MARIJUANA SALES TAX PROCEDURES

3 (1) The Department s procedures governing Retail Sales Tax described in the rules promulgated under Articles 21 and 26 of Title 39, C.R.S. shall, to the extent not inconsistent with the provisions of Article 28.8 of Title 39, C.R.S. and the rules promulgated pursuant thereto, likewise govern the procedures with respect to the collection, reporting, and remittance of Retail Marijuana Sales Tax. (2) Any vendor making sales of Retail Marijuana at a Retail Marijuana Store shall file a separate Retail Marijuana Sales Tax Return for Retail Marijuana Sales Tax collected in addition to the Retail Sales Tax Return for Retail Sales Tax collected. (a) The Retail Marijuana Sales Tax Return shall be filed electronically by all such vendors. The remittance of the Retail Marijuana Sales Tax shall be made in accordance with procedures prescribed on the Department s website or on forms published by the Department. (b) If any vendor making sales of Retail Marijuana is unable to file Retail Marijuana Sales Tax Returns electronically, such vendor may apply to the Department for a waiver of electronic filing requirements. The Department may grant such a waiver upon a showing of good cause. SALES TAX ON RETAIL MARIJUANA AND RETAIL MARIJUANA PRODUCT Retail Marijuana Sales Tax is imposed on the full purchase price of all Retail Marijuana and Retail Marijuana Product. The sale of any product that contains any amount of Retail Marijuana or any derivative thereof is subject to the Retail Marijuana Sales Tax on the full purchase price of such product. RETAIL MARIJUANA EXCISE TAX (1) Incidence of tax. The excise tax is imposed upon the Retail Marijuana Cultivation Facility, who shall pay the excise tax to the Department upon the first sale or Transfer of Retail Marijuana to a Retail Marijuana Store, a Retail Marijuana Products Manufacturing Facility, or another Retail Marijuana Cultivation Facility. (2) Calculation and Payment of Tax. (a) Calculation of Average Market Rate. (i) The Department will calculate the Average Market Rate using reported sales of each category during the test period. The Department will determine the best methodology to arrive at the Average Market Rate. The Department may, from time to time, change its method of calculating the Average Market Rate if, in the judgment of the Department, such change is necessary to arrive at the most accurate Average Market Rate given the market conditions. (b) The tax shall be calculated on the basis of the category of the Retail Marijuana Product (i.e., Bud, Trim, or Immature Plant) being sold or Transferred. (i) If a sale or Transfer of Retail Marijuana includes any Bud in the transaction, then the total weight of the Retail Marijuana sold or Transferred shall be multiplied by the Average Market Rate for Bud and the result shall be multiplied by 15% to arrive at the amount of tax due. Notwithstanding this rule, the inadvertent inclusion of inconsequential amounts of Bud in a sale that is otherwise Trim shall not be

4 treated as the sale of Bud and the tax shall be calculated based on the Average Market Rate for Trim. (ii) If a sale or Transfer of Retail Marijuana is a sale of Trim, and does not include any Bud or Concentrate, then the total weight of the Retail Marijuana sold or Transferred shall be multiplied by the Average Market Rate for Trim and the result shall be multiplied by 15% to arrive at the amount of tax due. Notwithstanding this rule, the inadvertent inclusion of inconsequential amounts of Bud in a sale that is otherwise Trim shall not be treated as the sale of Bud and the tax shall be calculated based on the Average Market Rate for Trim. (iii) In the case of a sale or Transfer of whole Immature Plants, the number of Immature Plants sold shall be multiplied by the Average Market Rate for Immature Plants and the result shall be multiplied by 15% to arrive at the amount of tax due. (iv) In the case of a sale or Transfer of Concentrate created by a Retail Marijuana Cultivation Facility, the tax shall be calculated by multiplying the amount of Trim that was used to create the Concentrate by the Average Market Rate for Trim, adding the product of the amount of Bud used to create the Concentrate multiplied by the Average Market Rate for Bud, and multiplying that sum by 15% to arrive at the amount of tax due. (A) Example (3) Evidence of Payment of Tax. A grow operation uses 100 grams of Trim and 5 grams of Bud to create 7 grams of Concentrate. Assume the Average Market Rate for Trim is $10 per gram and the Average Market Rate for Bud is $95 per gram. The calculation described above would be ((100*$10)+(5*$95))*0.15 =($1,000+$475)*0.15 = $ excise tax (a) Both the Retail Marijuana Cultivation Facility and the first purchaser or transferee shall maintain documentation of the payment of the excise tax. Such evidence may be the purchase or Transfer invoice, so long as the invoice shows the name and license number of the Retail Marijuana Cultivation Facility, name and license number of first purchaser or transferee, the amount of excise tax paid by the Retail Marijuana Cultivation Facility, the category of product being sold or Transferred, the date of sale or Transfer, and the weight of the product being sold or Transferred. (4) Special rule for a One-Time Transfer of Medical Marijuana, Medical Marijuana Concentrate, and / or Medical Marijuana Infused-Product from a Medical Marijuana Business to a Retail Marijuana Store, Retail Marijuana Products Manufacturing Facility, or Retail Marijuana Cultivation Facility. (a) The statutes do not impose the excise tax on Medical Marijuana, Medical Marijuana Concentrate, and / or Medical Marijuana Infused-Product subject to the One-Time Transfer from a Medical Marijuana Business to a Retail Marijuana Store, Retail Marijuana Products Manufacturing Facility, or Retail Marijuana Cultivation Facility under subsections (1)(a)(III) and IV, C.R.S., and Rule R 211 of 1 CCR (b) Medical Marijuana and / or Medical Marijuana Concentrate subject to the One-Time Transfer from a Medical Marijuana Cultivation Facility to a Retail Marijuana Cultivation Facility

5 shall be subject to the excise tax upon the first sale or Transfer from the Retail Marijuana Cultivation Facility to a Retail Marijuana Store, a Retail Marijuana Products Manufacturing Facility or another Retail Marijuana Cultivation Facility, including but not limited to a Transfer from the Retail Marijuana Cultivation Facility to another Retail Marijuana Establishment under common ownership with the Retail Marijuana Cultivation Facility. (c) The One-Time Transfer from a Medical Marijuana Business to a Retail Marijuana Store, Retail Marijuana Products Manufacturing Facility, or Retail Marijuana Cultivation Facility may only occur once per licensee, in accordance with Rule R 211 of 1 CCR BOOKS AND RECORDS OF RETAIL MARIJUANA EXCISE TAX Copies of all books and records required to be maintained pursuant to section , C.R.S., must be maintained at each Retail Marijuana Store, Retail Marijuana Products Manufacturing Facility, or Retail Marijuana Cultivation Facility for a period of at least four years. LICENSES, RETURNS, AND BONDING (1) A Retail Marijuana Cultivation Facility shall file a Retail Marijuana Excise Tax Return monthly reporting the total amount of Retail Marijuana sold or Transferred and the excise tax due thereon. (2) The surety bond required by subsection (4), C.R.S., shall be evidenced by a filing with the Department prior to the first sale or Transfer of Retail Marijuana by the Retail Marijuana Cultivation Facility. (3) Failure to file evidence of the bond with the Department may result in appropriate administrative remedies by the State Licensing Authority. The Department may allow up to thirty days after the effective date of this rule for a Retail Marijuana Cultivation Facility to obtain a conforming bond and file evidence of such bond with the Department. RETAIL MARIJUANA EXCISE TAX PROCEDURES The Department s procedures governing Retail Sales Tax described in the rules promulgated under Articles 21 and 26 of Title 39 shall, to the extent not inconsistent with the provisions of Article 28.8 of Title 39, C.R.S. and the rules promulgated pursuant thereto, likewise govern the procedures with respect to the collection, reporting, and remittance of excise tax on Retail Marijuana. Editor s Notes History Entire rule emer. rule eff. 12/26/2013.

With respect to rules promulgated under Article 28.8 of Title 39, the following terms have the following meanings:

DEPARTMENT OF REVENUE - Tax Group RETAIL MARIJUANA TAX 1 CCR 201-18 [Editor s Notes follow the text of the rules at the end of this CCR Document.] DEFINITIONS 39-28.8-101 With respect to rules promulgated