State Tax Rates & Revenues for Adult-Use Cannabis Across the US

US-cannabis-tax-rates-and-revenues

Legalizing cannabis for adults has provided states a new revenue stream to bolster budgets and fund important services and programs.

As of November 2020, states reported a combined total of $6.59 billion in tax revenue from legal, adult-use cannabis sales. Just imagine what that number would be if the states put pressure on municipalities to issues more permits to operators, in turn, taking advantage of the estimations of upwards of 70-80% cannabis sales not being taxed due to illegal or traditional market sales, like in California.

Since 2012, 15 states have enacted laws legalizing, taxing, and regulating cannabis for adults 21 and older. Five of the laws just passed in 2020 in states where licensing has not yet begun.

This is a review of each state’s tax rate, population, and state tax revenue for adult-use cannabis thanks to our friends at the Marijuana Policy Project.

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1. Alaska (pop. 0.7 million) | Tax rate: $50/ounce at wholesale

Alaska voters approved an initiative to regulate cannabis for adult-use in November 2014. The first adult-use stores opened in October 2016. A number of factors initially resulted in slower revenue generation.

MPP-Alaska-cannabis-tax-report
Image from MPP.org

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2. Arizona (pop. 7.3 million) | Tax rate: 16% excise tax on sales; 5.6% standard transaction privilege tax

Arizona voters approved an initiative regulating cannabis for adult-use, sales have not yet begun.

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3. California (pop. 39.6 million) | Tax rate: $9.25 per ounce for flowers or $2.75 on leaves/trim; 15% excise tax; 7.25% standard sales tax

California voters approved an initiative regulating cannabis for adult-use in November 2016. The state’s first adult-use stores began to open in January 2018, yet the transition from unregulated, grey market providers to a licensed and regulated system has been more gradual than anticipated. In addition, localities have been slow to adopt SOP and issue permits.

California-MPP-cannabis-tax-report
Image from MPP.org

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4. Colorado (pop. 5.7 million) | Current tax rate: 15% wholesale, 15% special retail

On January 1, 2014, Colorado became the first state with legal adult-use sales of cannabis. Colorado already had a developed medical cannabis regulatory system. The state has a robust medical program, with about 1.6% of the population enrolled.

Colorado-MPP-cannabis-tax-report
Image from MPP.org

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5. Illinois (pop. 12.7 million) | Tax rate: 7% at wholesale; from 10-25% at retail, depending on potency; 6.25% standard sales tax

On June 25, 2019 HB1438 was signed into law, legalizing and regulating cannabis for adults’ use. Sales from existing medical cannabis businesses began on January 1, 2020.

Illinois-MPP_cannabis-tax-report
Image from MPP.org

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6. Maine (pop. 1.3 million) | Tax rate: Wholesale tax of $335 per pound with lower rates for trim and seedlings; 10% sales tax

In November 2016 Maine voters approved an initiative regulating cannabis for adult-use, yet sales did not begin until October 9, 2020. The state has not provided data yet on tax revenues.

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7. Massachusetts (pop. 6.9 million) | Tax rate: 10.75% excise tax on sales; 6.25% standard sales tax

Massachusetts voters approved an initiative regulating cannabis for adults’ use in November 2016, yet the first stores did not open until November of 2018.

Massachusettes-MPP_cannabis-tax-report
Image from MPP.org

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8. Michigan (pop. 10 million) | Tax rate: 10% excise tax on sales; 6% standard sales tax

Michigan voters approved an initiative to legalize and regulate marijuana for adult-use in November 2018. Sales began in December 2019, but localities have been slow to opt-in like Detroit which opted-in November 24, 2020.

Michigan-MPP-cannabis-tax
Image from MPP.org

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9. Montana (pop. 1.1 million) | Tax rate: 20% excise tax on sales

Montana voters approved an initiative regulating cannabis for adult-use on November 3, 2020. Sales have not yet begun.

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10. Nevada (pop. 3 million) | Tax rate: 15% wholesale, 10% special retail

In November 2016, Nevada voters approved an initiative legalizing cannabis for adult-use. The first adult-use stores were scheduled to be licensed in 2018, but medical cannabis dispensaries were approved by the governor to begin selling to adults July 1, 2017.

Nevada-MPP_cannabis-tax-
Image from MPP.org

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11. New Jersey (pop. 8.9 million) | Tax rate: 6.625% standard sales tax; 1-2% local option taxes; excise tax on cultivation anticipated

A constitutional amendment requiring the legislature and the Cannabis Regulatory Commission to control cannabis for adult use was approved by more than two-thirds of New Jersey voters on November 3, 2020. As of November 19, 2020, the legislature has not yet enacted legislation to enact the bill, and sales have not yet begun.

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12. Oregon (pop. 4.2 million) | Tax rate: 17% at retail

In November 2014, Oregon voters passed an adult-use cannabis regulation initiative, and the state’s first adult-use stores opened in October 2016. In addition, from October 2015 until December 31, 2016, the legislature authorized medical cannabis dispensaries to sell a limited amount of cannabis (five grams) to adults. Beginning January 4, 2016, these sales were taxed at 25%. Medical patients in the state (about 0.95% of Oregon’s population and dropping) can purchase cannabis from adult-use stores tax-free.

Oregon-MPP-cannabis-tax
Image from MPP.org

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13. South Dakota (pop. 884,000) | Tax rate: 15% excise tax on sales; 4.5% standard sales tax

South Dakota voters approved an initiative regulating cannabis for adult-use on November 3, 2020. Sales have not yet begun.

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14. Vermont (pop. 620,000) | Tax rate: 14% excise tax on sales; 6% standard sales tax

Gov. Phil Scott (R) permitted S.54 to go into law without his signature on October 7, 2020. The bill will legalize, control and tax the selling of cannabis for use by adults. In 2018 did the legislature and governor legalized personal ownership and cultivation. Controlled sales are scheduled to begin May 1, 2022.

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15. Washington (pop. 7.5 million) | Tax rate: 37% at retail since July 2015; 6.5% sales tax

An adult-use measure was approved by Washington voters in

November 2012, and the first stores opened in July 2014.

At the time, the state had an unregulated medical marijuana dispensary scheme, arguably illegal, which was different from the controlled adult-use network. This resulted in a ramp-up that was slower than in Colorado. In addition to changing the tax rate to 37 percent in 2015, a medical endorsement program was established by the legislature that adult-use stores could apply to join.

Washington-MPP-cannabis-tax
Image from MPP.org

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Click HERE for the full report.


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