However, state tax rates on medical marijuana are relatively low and obstacles (e.g., doctor appointment, application fee) limit its consumption. Both the federal tax code as well as the soon-to-be-effective New York State cannabis tax rates will have a large impact on the state’s cannabis industry. However, these businesses face a unique challenge since marijuana is still considered illegal at the federal level.
Massachusetts
The major challenge to the effectiveness of wholesale taxes is tax avoidance by vertically integrated firms. A fully integrated firm that grows plants from seeds and possesses its product until the point of sale never truly sells the product as a wholesaler. If mandated to report an inter-company sale, the operator can avoid price-based https://www.bookstime.com/articles/trust-accounting-for-lawyers taxes by selling the product internally at little or no price until the point of the retail sale. Separate from taxation, policymakers should implement a regulatory structure that enables legal businesses to convert consumers to the legal market, as well as consider the regulatory framework for and taxation of medical marijuana.
Colorado (pop. 5.8 million) Tax rate: 15% wholesale, 15% special retail
As legal cannabis markets mature, they deserve equality and the right to leave the trappings of federal prohibition behind, say Moxy Accounting’s Katye Maxson-Landis and Katie Scates. Arizona voters approved an initiative regulating cannabis for adults’ use on November 3, 2020. Maine voters approved an initiative regulating cannabis for adults’ use in November 2016, but sales did not begin until October 9, 2020.
Specific State and Local Taxes
The ability of a legal market to generate meaningful revenue is determined by the ability of licensed operators to outcompete these illicit sellers. [5] Because states’ tax methods and prices differ, this changes as wholesale and retail prices change. For example, Alaska’s $50/ounce tax would be higher than Washington’s 37% excise tax + standard 6.5% sales tax if average prices were below $114.94/ounce in both states. From 2022 to 2023, Illinois’ cannabis revenue slightly declined for the first time. That is at least partially because Missouri legalized recreational cannabis with one of the lowest excise tax rates in the nation, which reduced the out-of-state revenue and is a magnet for central Illinoisans trying to save money.
- Connected to marijuana consumption, which is best expressed by the level of THC (Tetrahydrocannabinol, the main psychoactive compound in marijuana) or weight.
- Lastly, changes to federal regulation would have big implications for the marijuana industry and tax revenues.
- These issues should not serve as a deterrent to federal legalization or the introduction of interstate commerce.
- Measures the change in prices of all goods and services purchased for consumption by urban households.
- Specifically, these businesses are often cash intensive since many can’t use traditional banks to deposit their earnings.
- That amounts to about 10 percent of the 2019 average wholesale price or about 14 percent of the September 2023 wholesale price.
The changes could help smaller independent businesses that are struggling to stay afloat
Senator Cooney Announces Wins for Cannabis in FY25 State Budget – The New York State Senate
Senator Cooney Announces Wins for Cannabis in FY25 State Budget.
Posted: Fri, 19 Apr 2024 07:00:00 GMT [source]
Successfully outcompeting illicit market sales obviously makes a massive difference to the revenue states can expect. Unfortunately, there does not seem to be a one-size-fits-all solution to this as there are significant differences in the illicit markets among states. In some markets, like California, Oregon, and Washington, an established and culturally accepted, yet unlicensed, marijuana industry has been operating relatively openly. It is important for policymakers to be familiar with the illicit market when setting tax rates.
Sacramento — The California Department of Tax and Fee Administration (CDTFA) reported cannabis tax revenue today for the first quarter of 2024. As of May 16, total cannabis tax revenue from first-quarter returns is $259.9 million. medical marijuana accounting This figure includes $152.5 million in cannabis excise tax and $107.4 million from sales tax collected from cannabis businesses. These figures do not include outstanding returns or returns that still are being processed.
Estimated State Sales Tax Revenue from Adult-Use Cannabis (Michigan)
- At the time, the state had an unregulated, arguably illegal, medical cannabis dispensary system, which was separate from the regulated adult-use program.
- The legislature and governor had legalized personal possession and cultivation only in 2018.
- Price-based taxes also capture a relatively consistent percentage of overall spending in the market.
- Nevada voters approved an initiative regulating cannabis for adult use in November 2016.
- It could be prudent for states to set aside monies in trust fund when revenues are high to provide a buoy during low revenue periods.
- Local governments in 12 states also levy an excise tax on marijuana, but these taxes are almost universally percentage-of-price taxes.
- The fact that marijuana shares the schedule with LSD and heroin does not mean the federal government considers consumption equally harmful.
- Legal adult-use cannabis sales have not begun in the state yet, but they are anticipated in July 2024.
- Washington’s voters also approved an adult-use measure in November 2012, and its first stores opened in July 2014.
- Additionally, cannabis taxes should be levied early in the value chain, similar to alcohol and tobacco excise taxes, to limit the number of taxpayers.