Tax Policy

Marijuana Taxes are How High?

Tax on marijuana sales vary by state.

With a growing number of states legalizing the use of recreational marijuana, one question keeps being asked: How high should we tax the sale of marijuana? Each state differs on the treatment of recreational-use marijuana but states that made the practice legal are seeing green!

Colorado legalized the recreational use of marijuana in 2014 and California followed suit in 2016. Since weed became legal in these states, California and Colorado collectively generated roughly $4 billion in tax revenue.

But how high are the taxes on marijuana in your state?

Alaska

Since Alaska levies no state-wide sales tax there is generally no tax on the purchase of marijuana. Instead, cultivation facilities pick up the tab. The tax is imposed when marijuana is sold or transferred from a licensed facility to a retail marijuana shop or product manufacturing facility.

The tax equates to $50 per ounce sold from a cultivating facility to a marijuana dispensary or retailer. Although the tax is reflected in the price to the end consumer, Alaskans pay no sales tax when purchasing marijuana.

California

Just like Alaska, California imposes a tax on the cultivation and sales of marijuana to distributors. The tax on cultivators is:

  • $9.25 per dry-weight ounce of cannabis flowers,
  • $2.75 per dry-weight ounce of cannabis leaves, and
  • $1.29 per ounce of fresh cannabis plant

Not only does California impose a tax on the cultivation of marijuana but they also impose an excise tax to the end consumer. Effective January 1, 2018, the excise tax imposed upon retail purchasers of all cannabis and cannabis products, including medicinal cannabis, is 15 percent.

Colorado

Just like California, Colorado imposes a double tax on the cultivation and sale of marijuana. Colorado imposes a 15 percent excise tax on the sale of marijuana from a cultivator to a retailer and an additional 15 percent sales tax to the end consumer.

Massachusetts

Massachusetts imposes an excise tax of 10.75 percent on the retail sale of marijuana. On top of this the state imposes a state-wide sales tax of 6.25 percent and a local sales tax as high as 3 percent.

Nevada

Nevada imposes a 15 percent excise tax on the first wholesale sale (cultivator to distributor) and an additional 10 percent excise tax for the retail sale of recreational marijuana. Cardholders with a license to purchase medical marijuana are not subject to the 10 percent excise tax.

Oregon

Just like Alaska, Oregon has no general state-wide sales tax. However, on the sale of recreational marijuana Oregon imposes a 17 percent excise tax. Under certain circumstances cities and counties may impose up to an additional 3 percent tax. Retailers can generally retain 2% of the tax to cover expenses.

Washington

Washington imposes the highest excise tax on marijuana in the United States. At a staggering 37 percent excise tax rate, Washington is by far the most expensive state to purchase pot.


Photo Copyright: <a href='https://www.123rf.com/profile_jirkaejc'>jirkaejc / 123RF Stock Photo

Jeremias Ramos is a CPA working at a nationally recognized full-service accounting, tax, and consulting firm with offices conveniently located throughout the Northeast. Jeremias specializes in tax and business consulting with focus areas in real estate, professional service providers, medical practitioners, and eCommerce businesses.

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