American attitudes towards the legalization of marijuana have shifted in the last few years. In 2019, 66% of Americans say the use of marijuana should be legal, which represents a stark difference from the 33% of Americans who supported the measure in 2009.
As a result, a growing number of states have legalized recreational marijuana. Nine states are currently selling marijuana recreationally and several other states have legalized marijuana but are still setting up the retail and tax structure.
States currently selling recreational marijuana:
- Alaska
- California
- Colorado
- Illinois
- Massachusetts
- Michigan
- Nevada
- Oregon
- Washington
States where marijuana is legal, but not sold yet:
- Maine
- Vermont
Selling marijuana recreationally is a fairly new trend, so as you might expect, the tax codes are still evolving.
As it stands right now, every state taxes marijuana differently.
Some charge consumer’s a sales tax and charges the growers an excise tax.
Some states charge a tax based on weight or potency.
To clarify the patchwork of tax rules, we’ll explore which recreational states levy the highest taxes.
Taxes on Recreational Marijuana
State | Sales Tax | Additional tax |
Alaska | 0% | $50/oz. mature flower; $25/oz. immature flower; $15/oz. trim; $1 per clone |
California | 15% | $9.65/oz. flower; $2.87/oz. leaves cultivation tax; $1.35/oz cannabis plant |
Colorado | 15% | 15% excise tax |
Illinois | — |
|
Massachusetts | 10.75% | — |
Michigan | 10% | — |
Nevada | 10% | 15% excise tax |
Oregon | 17% | — |
Washington | 35% | — |
*Source: Tax Foundation
What do the different types of taxes mean?
When a state moves to sell recreational marijuana, the state must decide how to tax it. Every state is different, but most states utilize three different ways to levy taxes, which include:
Percentage of price
These taxes work similarly to sales tax, where the consumer pays a certain percentage on top of the retail price and the retailer turns it over to the state. In most cases, the retailer increases its prices to cover this cost.
Weight-based taxes
Weight-based taxes are modeled after cigarette taxes, where a tax is levied on every box. With cannabis, the tax is levied by the weight of the plant as opposed to a box. Usually, there’s a different amount of tax assigned to different products.
In the chart above, you notice California charges $9.65 per ounce on marijuana flowers, a $2.87 per ounce tax on marijuana leaves, and a $1.35 per ounce tax on fresh plant material. Alaska has similar charges but on different kinds of products.
This tax is usually passed on to the consumer as well.
Potency-based taxes
Potency-based taxes are modeled after liquor, where drinks with stronger alcohol content are taxed higher. With marijuana, potency is based on THC levels. The higher the level of THC, the stronger the product.
Illinois is the only state that levies taxes like this. As you can see from the chart above, the strongest products (those with a THC concentration above 35%) are taxed the highest at 25%. The percentage of tax levied decreases with…
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