State Taxes on Recreational Marijuana

All states that have established a legal market for recreational marijuana impose hefty special taxes on its sale.

By , J.D., USC Gould School of Law

Medical use of marijuana has long been legal in a majority of the states; such use requires a prescription from a doctor. But in a growing national trend, 18 states have acted to legalize recreational marijuana usethat is, the use of a specified amount for any purpose without a prescription. These states are:

  • Alaska
  • Arizona
  • California
  • Colorado
  • Connecticut
  • Illinois
  • Maine
  • Massachusetts
  • Michigan
  • Montana
  • Nevada
  • New Jersey
  • New Mexico
  • New York
  • Oregon
  • Vermont
  • Virginia and
  • Washington state.

Eleven of these states have established legal markets where customers can purchase marijuana from state-licensed marijuana dispensaries or retailers. Connecticut, New Jersey, New Mexico, New York, Montana, Vermont, and Virginia have not yet implemented a legal market. The District of Columbia legalized marijuana in 2014, but Congress prevents it from implementing the law. South Dakota voters approved a marijuana legalization initiative in 2020, but it is being challenged in state courts.

Each state that has established a legal market for recreational marijuana imposes its own taxes on cultivation and sales.

Taxes on the Cultivation and Sales of Recreational Marijuana

Taxes on the cultivation and sales of recreational marijuana vary greatly from state to state. The three main types of taxes are:

  • Excise taxes. Most states impose excise taxes on retail purchases of marijuana, similar to those on tobacco and alcohol. These taxes can be hefty, just like they are for cigarettes. For example, Washington imposes a 37% excise tax on recreational marijuana.
  • Sales taxes. In most states, customers must pay the state sales tax, which the marijuana dispensary or retailer collects. Some states have established special statewide sales tax rates for marijuana sales. In most states, cities and counties are allowed to charge additional local sales taxes on top of the state sales tax. These taxes vary.
  • Cultivation taxes. Some states, like California, also impose cultivation taxes that marijuana growers, processors, and/or distributors must pay. These taxes are typically based on the weight of the marijuana or charged per plant. They're paid by the cultivator, processor, or distributor, not the consumer. However, the cost of the taxes is passed on to customers in the form of higher prices.

State Excise and Sales Taxes on Recreational Marijuana Consumers

The following chart shows the excise and sales taxes consumers must pay when purchasing marijuana. The retailer adds these taxes to the total price and then sends the money to the appropriate state and local tax agencies. For example, recreational marijuana sellers in Arizona must charge customers a 16% excise tax plus a 5.6% states sales tax for a 21.6% total tax.

State

Tax Rate

Alaska

5% excise tax in Anchorage, Mat-Su Borough, Fairbanks, and Ketchikan; 3% excise tax in Juneau

Arizona

16% excise tax

5.6% state sales tax

California

15% excise tax

7.25% state sales tax

1%-15% local sales tax

Colorado

15% excise tax

Illinois

20% excise tax on infused food and beverages

10% excise tax on all other cannabis products with 35% or less THC

25% excise tax on all other cannabis products with more than 35% THC

6.25% state sales tax

up to 3% local sales tax

Maine

10% excise tax

5.5% state sales tax

Massachusetts

10.75% excise tax

6.25% state sales tax

up to 3% local excise tax

Michigan

10% excise tax

6% state sales tax

Nevada

15% excise tax

4.6% state sales tax

Oregon

17% excise tax

3% local tax

Washington

37% excise tax

6.5% state sales tax

0.5%-3.9% local sales tax

State Cultivation Taxes on Recreational Marijuana Producers

The following chart shows the cultivation taxes that recreational marijuana producers must pay in each state. Producers must pay these taxes out of their own pockets. They may then pass the cost on to consumers in the form of higher prices.

State
Tax Rate
Alaska
$50/oz. mature flowers
$25/oz. immature flowers and buds
$15/oz. stems and leaves
$1 per clone
California
$9.65/oz. flowers
$2.87/oz. leaves
$1.35/oz. fresh plant
Maine
$335/lb. flowers and mature plants
$94/lb. trim
$1.5 per immature plant or seedling
$0.3 per seed

Talk to a Tax Attorney

Need a lawyer? Start here.

How it Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you
Get Professional Help

Talk to a Tax attorney.

How It Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you