High taxes for cannabis businesses could be eased by new federal rules

Measures the change in selling prices received by domestic producers of goods and services. [5] Reported marijuana market size is the median of the reported market size from several studies of marijuana consumption within the United States. The inspections stem from multiple complaints filed by worried Livermore parents and school officials concerning illegal nicotine use, “especially the selling of flavored vapes to minors,” police said. Members medical marijuana accounting of the House Rules Committee, which blocked numerous drug policy reform amendments from various spending measures last year under GOP control, are set to consider the proposed changes to the MilConVA bill next week, where leadership will determine whether to allow them to advance to the floor. Another measure that was filed ahead of Wednesday’s amendment deadline for the appropriations legislation comes from Rep. Robert Garcia (D-CA).

State Sales Tax Revenue from Adult-Use Cannabis (Massachusetts)

These issues should not serve as a deterrent to federal legalization or the introduction of interstate commerce. The unique treatment of cannabis has resulted in a wide variety of tax designs.[10] Table 1 below illustrates the variety of tax policies implemented across the U.S. states. To date, three states—Connecticut, Illinois, and New York—incorporate THC content into their tax regimes. Lessons from these and other states provide valuable information for tax policy across all U.S.

How did the child tax credit change over time?

A substantial piece of the 15% wholesale tax paid by cannabis cultivators goes to local governments, while the remainder is deposited into the state’s Distributive School Account to fund public education. In 2022, $147 million was directed to the state’s K-12 education budget from sales generated by the adult-use cannabis market.[17] https://www.bookstime.com/tax-rates/florida The 10% cannabis retail tax has added hundreds of millions of dollars to the state’s rainy day fund. A hybrid weight-potency tax could permit higher tax rates for more potent products with a limited number of categories. This would allow for higher tax rates on more potent products while limiting the costs of testing.

Marijuana tax rates in New Jersey

A percentage-of-price cannabis tax typically works like a general sales tax in that the tax is calculated as a percentage of the retail price, is paid by consumers in addition to their purchase at checkout, and is remitted to the government by the retailer. However, like other excise taxes, a cannabis tax rate is typically higher than the government’s general sales tax rate. State cannabis tax rates range from 6 percent in Missouri to 37 percent in Washington. Local cannabis taxes are typically capped by the state and set between 2 percent and 5 percent. Counting states that have passed marijuana tax legislation but not begun legal sales, 15 states solely use this type of tax and five states use it in addition to another tax.

Several important lessons emerged from the rollout of marijuana laws and the adoption of legal markets. Reliable and cost-effective potency-based testing remains a significant barrier, particularly for raw plant material. Testing consistency still varies across labs and a sizable percentage of product is destroyed during the testing process. So, rough total out the door, expect your cannabis leaf to be taxed at 16%, edibles at 26%, and concentrates at 31%. For more information, check out this report on the Arkansas medical marijuana industry. [1] Drug scheduling is determined by a combination of the risk of abuse and potential for medical use.

• For example, Illinois, Massachusetts, New Jersey, and New York all dedicate a portion of their cannabis tax revenue to programs that support economic and workforce development in communities disproportionally harmed by previous drug laws and enforcement.
• Until June 30, 2026, 60% of the excise tax goes to the Social Equity and Innovation Fund.
• Additionally, cannabis/marijuana business owners should be aware of nefarious investors who will try to put funds into these new businesses that could cause them to lose their entire business.
• For instance, taxing by price could drive down prices as consumers and businesses look to lower their tax liability.
• Relying on potency as a tax base introduces complexity to the system but also allows the excise tax to do what it is supposed to do—that is, to capture the negative externality.
• Through 2023, Michigan has collected more than $1 billion in adult-use cannabis tax revenues.

Marijuana tax rates in Massachusetts

• Instead, some states use revenue from cannabis taxes to fund programs related to the drug or the harmful effects of prior drug law enforcement.
• California has brought in over $5 billion in state cannabis tax revenue since legal sales began, and the state generated a total of just over $1 billion in cannabis taxes in 2023.
• In states that do collect, differences between the estimated potential revenue and actual collections are related to variations in regulatory and tax policy structures as well as market maturity.
• All other cannabis products containing more than 35% THC are subject to a 25% excise tax.
• Counting states that have passed marijuana tax legislation but not begun legal sales, 15 states solely use this type of tax and five states use it in addition to another tax.
• It does so by presenting arguments for a principled tax design of recreational marijuana and by discussing the different strategies and lessons from states with established marijuana markets.