Colorado’s Marijuana Market Faces Growing Pressure Over Tax Reporting
When voters approved recreational cannabis in 2012, the promise was clear: strict regulation would protect businesses and consumers, and the resulting tax revenue would fund schools, roads and other public programs. A recent CBS Colorado investigation suggests that promise is being tested, as industry insiders and state officials raise concerns about inaccurate wholesale reporting and its impact on state finances.
Inside the Allegations
Justin Trouard, CEO of Mammoth Farms and a former Army intelligence officer, says he has invested his life savings into the cultivation, harvesting and processing of cannabis oil products. In a private meeting with state regulators, Trouard alleged that some operators are manipulating wholesale transactions to lower their tax liabilities.
According to Trouard, one of the state’s largest vape manufacturers described how businesses could structure transfers to avoid paying taxes. He has published the details of these claims, along with supporting documents, on a website called . Trouard also filed a class‑action lawsuit asserting that the Marijuana Enforcement Division (MED) has known about questionable pricing practices but has not taken sufficient action.
“You see the tax revenue drop year after year after year,” Trouard told CBS Colorado. “Personally, I don’t think marijuana has ever fully contributed its potential.”
What the Data Show
Colorado’s seed‑to‑sale tracking system, METRC, requires licensees to report every wholesale sale. Those reported values determine the amount of excise tax owed. In the meeting recording obtained by CBS Colorado, a MED official described the pattern of suspicious entries as “the most important and existential threat we’ve ever faced as an industry.”
The official noted that thousands of transactions each month are logged at values of just $1 or a few cents—far below market rates for bulk cannabis. Dominique Mendiola, director of the Marijuana Enforcement Division, explained that METRC is a reporting tool, not a compliance enforcement mechanism:
“The system doesn’t put walls up that would prevent a licensee from entering something in the system, even if it’s inaccurate.”
Mendiola added that while many of the odd entries have legitimate explanations, those that cannot be justified are referred to the Colorado Department of Revenue’s taxation division for further review.
Regulatory Response and the Path Forward
State Sen. Mark Snyder, who has sponsored several cannabis‑reform bills, characterized the current regulatory framework as increasingly reactive rather than proactive.
“It tells me that we’ve lost control of the regulatory system,” Snyder said.
Snyder believes Colorado can restore confidence, but cautions that doing so will require significant political effort and a coordinated strategy to move from a reactive to a fully regulated, properly taxed market.
The MED said it continues to rely on data analysis and on‑site inspections to identify which suspicious entries merit deeper investigation. The agency declined to disclose to CBS Colorado how many referrals have been made to tax auditors or how many investigations are presently underway.
Why It Matters Beyond Cannabis Users
Trouard stresses that the consequences of under‑reported sales extend beyond those who consume marijuana. Tax revenue from the industry supports services that benefit all Coloradans—education, infrastructure and public health programs. If businesses that follow the rules are undercut by competitors who avoid taxes, the state’s ability to fund those programs diminishes.
“Could you have looked the other way?” CBS Colorado reporter Karen Morfitt asked. Trouard replied, “Of course I could have. The way you stay in this is to cheat the rules.”
Sources
For the original CBS Colorado report, including the meeting recording and supporting documents, see: Here.
