Americans love cannabis about as much as they hate taxes. But consumers and businesses in some states hate the tax system more than others.
While more than 60 percent of the Americans support regulated cannabis legislation, states have wide discretion on how to collect revenue from it.
Nine states (Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Vermont, and Washington) and the District of Columbia currently have legal, adult-use marijuana, but only eight of these jurisdictions have legal markets (Vermont and D.C. have not yet established a retail system).
According to the Tax Foundation, of the states with legal markets, Alaska is the only state that does not impose some form of sales tax on end-users. In each of the other states, taxes levied on the sale of marijuana far exceed the general sales tax rate levied by that state.
Here is how the Tax Foundation breaks it down:
- In Alaska, which has no states sales tax, marijuana growers pay a tax of $50 per ounce when selling the product to marijuana dispensaries or retailers. While the cost of taxes paid is passed on to customers in the form of higher prices, end-users do not pay a sales tax when purchasing marijuana.
- In California, cultivators pay a per ounce of product tax at a rate of $9.25 per ounce of marijuana flowers and $2.75 per ounce of leaves. In addition, retailers collect from customers a 15 percent excise tax on the average market price of the product.
- Colorado imposes a 15 percent excise tax on the sale of marijuana from a cultivator to a retailer. In addition, the state levies a 15 percent sales tax (up from 10 percent in 2017) on retail sales to customers.
- Maine legalized recreational marijuana in 2016 by ballot initiative but has not yet established a legal market. Pending legislation would tax sales of marijuana at a rate of 10 percent and levy an excise tax on cultivators at a rate of $335 per pound of flower, $94 per pound of marijuana trim, $1.50 per immature plant or seedling, and $0.30 per seed. Governor LePage, however, has vowed to veto the legislation.
- Massachusetts, concerned its previous ballot initiative approved rate of 3.75 percent was too low, raised the excise tax rate to 10.75 percent in 2017.
- Nevada imposes an excise tax on the sale of marijuana by a cultivator to a distributor. This rate is set at 15 percent of the Fair Market Value as determined by the Nevada Department of Taxation. In 2017, Nevada created a new 10 percent sales tax paid by consumers.
- Oregon, which does not have a general sales tax, levies a 17 percent sales tax on marijuana.
- Washington levies a 37 percent sales tax on recreational marijuana.