Navigating State-by-State Sales Tax on Cannabis
As the cannabis industry continues to expand across the United States, understanding the varying sales tax regulations in different states becomes crucial for businesses and consumers alike. The patchwork of state laws creates a complex landscape, with each state implementing its own tax rates and structures. This article provides an overview of the sales tax on cannabis in all 50 states to help you stay informed and compliant.
States with Legal Recreational and/or Medical Cannabis
Alaska
- Recreational: $50 per ounce excise tax on flower, lower rates for other parts of the plant. No statewide sales tax; local taxes may apply.
- Medical: Same as recreational.
Arizona
- Recreational: 16% excise tax, plus standard sales tax of 5.6%. Local taxes may apply.
- Medical: Standard sales tax of 5.6%.
Arkansas
- Recreational: Not legal.
- Medical: 6.5% state sales tax, plus 4% excise tax and local taxes.
California
- Recreational: 15% excise tax, plus cultivation tax and local taxes.
- Medical: Same as recreational, but patients with a medical card may be exempt from some local taxes.
Colorado
- Recreational: 15% excise tax on wholesale, 15% sales tax.
- Medical: 2.9% state sales tax; local taxes may apply.
Connecticut
- Recreational: Effective from July 2023, 3% local tax, 6.35% state sales tax, and THC-based tax.
- Medical: No tax.
Delaware
- Recreational: Not legal.
- Medical: No tax.
Florida
- Recreational: Not legal.
- Medical: No sales tax.
Georgia
- Recreational: Not legal.
- Medical: Limited to low-THC oil, no tax.
Hawaii
- Recreational: Not legal.
- Medical: 4% state general excise tax.
Illinois
- Recreational: 10-25% excise tax based on THC content, plus 6.25% sales tax and local taxes.
- Medical: 1% sales tax.
Maine
- Recreational: 10% sales tax, plus excise tax based on weight.
- Medical: 5.5% sales tax.
Maryland
- Recreational: Effective from July 2023, 6% state sales tax.
- Medical: No tax.
Massachusetts
- Recreational: 10.75% excise tax, 6.25% state sales tax, up to 3% local tax.
- Medical: No tax.
Michigan
- Recreational: 10% excise tax, plus 6% sales tax.
- Medical: 6% sales tax.
Minnesota
- Recreational: Not legal.
- Medical: Effective from July 2023, no tax.
Missouri
- Recreational: 6% state sales tax, local taxes up to 3%.
- Medical: 4% sales tax.
Montana
- Recreational: 20% sales tax.
- Medical: 4% sales tax.
Nevada
- Recreational: 10% excise tax, plus 6.85-8.375% sales tax.
- Medical: 2% excise tax, plus 6.85-8.375% sales tax.
New Hampshire
- Recreational: Not legal.
- Medical: No tax.
New Jersey
- Recreational: 6.625% state sales tax, up to 2% local tax.
- Medical: No tax.
New Mexico
- Recreational: 12% excise tax, increasing 1% per year until reaching 18% in 2030, plus 5.125-8.6875% sales tax.
- Medical: No tax.
New York
- Recreational: 13% total sales tax (9% state excise tax, 4% local excise tax), plus THC-based tax.
- Medical: No tax.
North Dakota
- Recreational: Not legal.
- Medical: 5% sales tax.
Ohio
- Recreational: Not legal.
- Medical: 5.75% sales tax, plus local taxes.
Oklahoma
- Recreational: Not legal.
- Medical: 7% excise tax, plus state and local sales taxes.
Oregon
- Recreational: 17% state sales tax, up to 3% local tax.
- Medical: No tax.
Pennsylvania
- Recreational: Not legal.
- Medical: 5% excise tax on growers and processors.
Rhode Island
- Recreational: 7% state sales tax, 10% excise tax, 3% local tax.
- Medical: 7% sales tax.
South Dakota
- Recreational: Not legal.
- Medical: 4.5% sales tax.
Utah
- Recreational: Not legal.
- Medical: No tax.
Vermont
- Recreational: 14% excise tax, 6% sales tax.
- Medical: No tax.
Virginia
- Recreational: 21% state tax, plus potential local taxes.
- Medical: 5.3-7% sales tax.
Washington
- Recreational: 37% excise tax, plus 6.5% state sales tax and local taxes.
- Medical: Exempt from excise tax for registered patients, subject to 6.5% state sales tax and local taxes.
West Virginia
- Recreational: Not legal.
- Medical: No tax.
Wisconsin
- Recreational: Not legal.
- Medical: Not legal.
Wyoming
- Recreational: Not legal.
- Medical: Not legal.
States with Limited or No Cannabis Legalization
- Alabama: No tax. (Limited medical legalization)
- Idaho: Not legal.
- Indiana: Not legal.
- Iowa: No tax. (Limited medical legalization)
- Kansas: Not legal.
- Kentucky: Not legal.
- Louisiana: 4.45% state sales tax for medical cannabis.
- Mississippi: No tax. (Limited medical legalization)
- Nebraska: Not legal.
- North Carolina: Not legal.
- South Carolina: Not legal.
- Tennessee: Not legal.
- Texas: No tax. (Limited medical legalization)
- Wisconsin: Not legal.
Key Considerations for Businesses
- Compliance: Staying compliant with state and local tax regulations is critical. Regularly review tax codes and work with local tax authorities to ensure accurate tax collection and remittance.
- Pricing Strategies: Consider the impact of state and local taxes on your pricing strategies. High tax rates can significantly affect retail prices and consumer demand.
- Record-Keeping: Maintain meticulous records of all transactions to ensure accurate tax reporting and to prepare for potential audits.
- Advocacy: Engage with local and state governments to advocate for fair tax policies that support the growth and sustainability of the cannabis industry.
Conclusion
Understanding the state-by-state variations in cannabis sales tax is essential for navigating the industry effectively. By staying informed and compliant, businesses can better manage their operations and contribute to the broader goal of a thriving, regulated cannabis market.
For more detailed information and updates on cannabis taxation in your state, consult with local tax professionals and industry associations.