How cannabis taxes work by state

Published Jun 14, 2022 01:00 p.m. ET
iStock / William_Potter

Cannabis sales may be prohibited under federal law, but they are taxed and legal in several states, including Alaska, California, Colorado, Illinois, Massachusetts, Michigan, Nevada, Oregon, Rhode Island, and Washington.

Different cannabis tax rates

Percentage of price taxes are much like retail sales tax, as consumers are required to pay a tax on the total purchase price of cannabis products, then retailers give that money to the state. In some cases, states allow communities to add an additional percentage to the tax, quite often with a maximum rate.

Weight-based cannabis taxes are far more comparable to taxes levied on cigarettes, only instead of taxing the product by package, they are charged according to the weight of each purchase. States implementing this type of tax will often set different amounts based on product type, and the cost is added to the final purchase price.

Some states like Illinois opt for potency-based cannabis tax rates, charging more for products with a higher percentage of THC, much like we see with alcohol and liquor here, where it’s taxed a higher rate for simply being stronger. Many add a cannabis tax and compound it with additional state-controlled excise taxes.

Cannabis tax rates by states

Here, you’ll find a breakdown of how much cannabis tax is added to each purchase by state.

Alaska

  • $50 per ounce excise tax on flower
  • $15 per ounce excise tax for stems and leaves
  • $25 per ounce excise tax for immature flower

California

  • $9.25 per ounce cultivation tax for flower
  • $2.75 per ounce cultivation tax for leaves
  • $1.29 per ounce cultivation tax for fresh plant materials
  • In addition, customers must pay a 15% excise tax, as well as a 7.25% local retail sales tax on all cannabis products

Colorado

  • 15% of the Average Market Rate excise tax (applicable to all sales to stores)
  • Local tax up to 8% (optional)
  • Cannabis retail tax of 15%
  • 2.9% retail sales tax

Connecticut

  • 0.625 cents per 1mg of THC for cannabis flower
  • 2.75 cents per 1mg of THC for edibles
  • 0.9 cents per 1mg of THC for all other products
  • In addition, customers are charged a 6.35% retail tax as well as a 3% municipal sales tax

Illinois

  • 7% tax on sales (applicable to all sales to stores)
  • 10% retail excise tax for cannabis flowers with less than 35% THC
  • 20% retail excise tax for cannabis-infused products
  • 25% retail excise tax for cannabis flowers with more than 35% THC

Maine

  • $335 excise tax per pound for cannabis flower
  • $94 excise tax per pound for leaves and trimmings
  • $1.50 excise tax per pound per cannabis seedling
  • 35 cents excise tax per cannabis seed
  • In addition, customers must pay a retail sales tax of 10%

Massachusetts

  • 10% excise tax on all retail sales
  • Local tax up to 3% (optional)
  • In addition, a 6.2% retail sales tax applies to all purchases from cannabis stores

Michigan

  • 10% excise tax on retail sales
  • In addition, customers are charged a 6% state sales tax on cannabis purchases

Montana

  • 20% cannabis tax on the total retail price for all recreational products
  • Local tax up to 3% (optional)
  • 4% tax on medical cannabis products

Nevada

  • 15% wholesale excise tax (applicable to all sales to stores)
  • 10% retail tax on sales
  • In addition, customers are charged a 6.85% sales tax on every purchase

New Mexico

  • 12% excise tax on retail sales
  • In addition, sales tax is applied to all cannabis purchases

New Jersey

  • 6.625% state sales tax for recreational cannabis
  • 0.3% Social Equity Fee
  • Local sales tax up to 2% (optional)

New York

  • 0.5 cents per 1mg of THC for cannabis flower
  • 0.8 cents per 1mg of THC for cannabis concentrates
  • 0.3 cents per 1mg of THC for edibles
  • In addition, a 9% retail sales tax as well as a 4% local tax is applied to every purchase.

Oregon

  • 17% retail sales tax
  • Local tax up to 3% (optional)

Rhode Island

  • 10% cannabis tax
  • 3% community tax
  • In addition, the current 7% sales tax is applied to all purchases of cannabis products

Vermont

  • 14% cannabis excise tax
  • State sales taxes are also applied to each purchase

Washington

  • 37% cannabis tax for all retail sales
  • In addition, a 6.5% retail sales tax, as well as a local tax, are applied to each purchase (medical cannabis is exempt)
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