Eighteen states have legalized the sale of cannabis for general adult use and sales are already underway in 10 of those states. Every state allowing legal sales applies an excise tax to cannabis based on the product’s quantity, its price, or both. Quantity taxes are typically based on weight, though New York measures quantity by the amount of THC sold. ITEP research indicates that taxes based on quantity will be more sustainable over time because prices are widely expected to fall as the cannabis industry matures. Most states allowing for legal cannabis sales apply their general sales taxes to the product and local sales taxes also typically apply where such taxes exist.
map April 20, 2022
How Is Recreational Cannabis Taxed in Your State?
blog April 19, 2022
Cannabis Taxes Outraised Alcohol by 20 Percent in States with Legal Sales Last Year
In 2021, the 11 states that allowed legal sales within their borders raised nearly $3 billion in cannabis excise tax revenue, an increase of 33 percent compared to a year earlier. While the tax remains a small part of state budgets, it’s beginning to eclipse other “sin taxes” that states have long had on the books.
blog March 15, 2021
State and Local Cannabis Tax Revenue Jumps 58%, Surpassing $3 Billion in 2020Cannabis taxes are a small part of state and local budgets, clocking in at less than 2 percent of tax revenue in the states with legal adult-use sales. But they’re…
blog February 9, 2021
Does New York’s Cannabis Tax Idea Offer a Glimpse of the Future?
Taxing cannabis won’t end New York’s budget difficulties, but a potency tax could bring New York a more sustainable stream of cannabis tax revenue than we see in most states. It could also have significant benefits for cannabis consumers.
blog January 12, 2021
New Jersey Leads by Example with Its New Cannabis Tax
New Jersey lawmakers passed an innovative tax design that other states debating cannabis legalization should look to for inspiration. The state officially legalized cannabis in November when voters overwhelmingly approved a constitutional amendment by a margin of 67 to 33 percent. The amendment applied the state’s general sales tax to cannabis and allowed local governments to create their own taxes on the industry. The legislature added the most notable part of the tax structure last month with a Social Equity Excise Fee.
blog November 30, 2020
After the Dust Has Settled: How Progressive Tax Policy Fared in the General Election
While the results of the 2020 presidential election are all but set in stone—and a sign of life for progressive policy—the results of state tax ballot initiatives are more of a mixed bag. However, the overall fight for tax equity and raising more revenue to invest in people and communities is trending in the right direction.
blog October 22, 2020
Voters Have the Chance in 2020 to Increase Tax Equity in Arizona, Illinois, and California, And They Should
There’s a lot at stake in this election cycle: the nation and our economy are reeling from the effects brought on by the coronavirus pandemic and states remain in limbo as they weigh deep budget cuts and rush to address projected revenue shortfalls.
blog March 10, 2020
State and Local Cannabis Tax Revenue Jumps 33%, Surpassing $1.9 Billion in 2019
Excise and sales taxes on cannabis raised more than $1.9 billion in 2019. This represents a jump of nearly half a billion dollars, or 33 percent, compared to a year earlier. These are the findings of an ITEP analysis of newly released tax revenue data from the eight states where legal sales of adult-use cannabis took place last year.
March 4, 2020
ITEP Testimony Regarding Connecticut Senate Bill 16, An Act Concerning the Adult Use of Cannabis
This testimony explains the advantages of the cannabis tax structure proposed in Connecticut’s Senate Bill 16 and offers additional background information as well as ideas for potential changes to the bill.
blog December 9, 2019
Legal Cannabis and a Tax Cut, Too
A new ITEP report explains that an income tax cut for cannabis businesses embedded in the MORE Act is probably larger than the new 5 percent sales tax. This means that the average cannabis retailer—and its customers—could expect to pay LESS tax if the MORE Act is signed into law. Congress might have good reasons for structuring legalization this way, but it is an underappreciated aspect of the bill that should be made clearer as this debate progresses.
report December 9, 2019
Cannabis Legalization: Tax Cut or Tax Hike?
Understanding the full tax consequences of cannabis legalization requires evaluating not only the excise taxes proposed in most legalization bills, but also the effects on the federal income tax liability of cannabis businesses.
media mention October 14, 2019
POLITICO: Cannabis was supposed to be a tax windfall for states. The reality has been different.In all, five of the nine states that have set up tax systems for legalized marijuana employ cultivation levies on growers, while all but Alaska charge an excise tax specifically…
map September 16, 2019
Cannabis Tax Revenue, Per Capita, April – June 2019
Seven states currently allow for the legal, taxable sale of recreational cannabis. The above map shows per capita revenue collections from excise and sales taxes on cannabis during the second quarter of 2019, the most recent period for which data are available in every state. The most lucrative cannabis market in the country, from a tax revenue perspective, is in Washington State where the 46 percent combined tax rate applied to cannabis is the highest in the country. Collections in California and Massachusetts, by contrast, remain low as these states are still in the early stages of establishing their legal markets. ITEP has issued in-depth analyses of cannabis taxes in general and of California’s market in particular.
blog August 22, 2019
Why California’s Cannabis Market May Not Tell You Much about Legalization in Your State
New tax data out of California, the world’s largest market for legal cannabis, tell a complicated story about the cannabis industry and its tax revenue potential. Legal cannabis markets take time to establish, and depending on local market conditions, the revenue states raise can vary significantly.
blog August 7, 2019
State and Local Cannabis Tax Revenue on Pace for $1.6 Billion in 2019
Cannabis tax revenue is becoming more significant as legal sales grow. The tax is far from a budgetary panacea, but an ITEP analysis of revenue data reported by the seven states with legal cannabis sales underway suggests that excise and sales tax revenues from the sale of the drug could reach $1.6 billion this year.
May 10, 2019
Presentation: NCSL Task Force on State and Local Taxation, Taxing Cannabis
ITEP Research Director Carl Davis presented to the National Conference of State Legislatures (NCSL) Task Force on State and Local Taxation on approaches to cannabis taxation and the recent report Taxing Cannabis.
report January 23, 2019
State policy toward cannabis is evolving rapidly. While much of the debate around legalization has rightly focused on potential health and criminal justice impacts, legalization also has revenue implications for state and local governments that choose to regulate and tax cannabis sales. This report describes the various options for structuring state and local taxes on cannabis and identifies approaches currently in use. It also undertakes an in-depth exploration of state cannabis tax revenue performance and offers a glimpse into what may lie ahead for these taxes.
blog January 23, 2019
Cannabis Tax Debates are Ramping Up; Here’s What We’ve Learned from Five Years of Cannabis Taxation Thus Far
This year lawmakers in Connecticut, Delaware, Hawaii, Illinois, New Jersey, New York, Rhode Island, and Vermont will all be debating the taxation of recreational cannabis. A new ITEP report reviews the track record of recreational cannabis taxes thus far and offers recommendations for structuring cannabis taxes to achieve stable revenue growth over the long haul.