The November vote is almost here, and five states will be voting on whether or not to legalize marijuana – Arizona, California, Maine, Massachusetts, and Nevada. If all five states end up legalizing marijuana, that would mean a total of 10 states will allow people to purchase marijuana for recreational purposes (Alaska, Colorado, Oregon, Washington State, and Washington, D.C. already allow recreational marijuana).
As Boston’s WCVB pointed out, some of the states that could legalize marijuana in next month’s vote will have lower marijuana taxes than we’ve seen in other states to date. We took a look at the data in Cannabiz Media’s upcoming reference guide, Tracking Marijuana Licenses State-by-State: 2017 Edition, and the Cannabiz Database and found that some of the differences are quite significant. Let’s take a closer look.
Medical vs. Recreational Marijuana Taxes Today
In all states where recreational marijuana is legal, it is taxed at a higher rate than medical marijuana.
In Alaska, medical marijuana taxes include an excise tax of $50 per ounce paid on all dispensary or manufacturer purchases from medical and recreational cultivators. In other words, the same tax is charged on medical and recreational marijuana. Alaska also charges the same sales tax on medical and recreational marijuana (5%), but local municipalities are allowed to charge additional local taxes on recreational marijuana that could range from 5% to 15%.
In Colorado, the only tax that medical marijuana is subject to is sales tax (2.9% plus local taxes). The sales tax on recreational marijuana in Colorado is 12.9% (although it’s dropping by 2% to 10.9% in July 2017). There is also a recreational state excise tax of 15% and a local recreational tax of 2% to 5%.
In Oregon, there are no taxes on medical marijuana. Recreational marijuana is a different story. The recreational marijuana sales tax is 17% and local recreational taxes range from 1% to 3%.
Washington, D.C. only charges one tax on marijuana – a 6% sales tax on medical marijuana.
Washington State charges an excise tax on both medical and recreational marijuana of 37%. That is the only tax levied on medical marijuana in the state. For recreational marijuana, there is an additional 6.5% sales tax and a 1% to 3% local tax.
Medical vs. Recreational Marijuana Taxes in the Future
Looking at the states where recreational marijuana could become legal after the November vote, we see a similar pattern. Recreational marijuana is taxed at a higher amount than medical marijuana. However, the additional taxes on recreational marijuana aren’t as high as they are in some of the states where marijuana has already been legalized.
In Arizona, sales tax of 5.6% (plus local taxes) is charged on medical marijuana. In fact, that’s the only tax charged on medical marijuana in the state. Under Proposition 205, recreational marijuana in the state will be taxed at 15%.
Medical marijuana in California has an excise tax of 7.6% plus local taxes. Under Proposition 64, recreational marijuana would have a 15% sales tax as well as cultivation taxes for flowers and leaves of $9.25 per ounce and $2.75 per ounce, respectively.
Medical marijuana in Maine has a sales tax of 5%. In addition, the state charges a 7% meal tax on edible marijuana products. If recreational marijuana is legalized in Maine, it will have a 10% sales tax.
In Massachusetts, medical marijuana is not taxed, but recreational marijuana will be. The state will charge the state’s sales tax and a 3.75% excise tax. In addition, local taxes of 2% will be allowed.
In Nevada, there is an excise tax on medical marijuana of 2% and a sales tax of 6.85%. Recreational marijuana will have a 15% excise tax.
Is the Future of Recreational Marijuana Lower Taxes?
Overall, recreational marijuana is taxed at a higher rate than medical marijuana, but the gap isn’t as big in all states. For example, while the gap is very large in Colorado (up to a 32% gap between medical and recreational), Oregon (up to a 20% gap between medical and recreational), and Alaska (up to 15% gap between medical and recreational), it’s not as big in any of the states that will be voting on legalizing marijuana in November.
It’s too early to know if this is a trend, but knowing that many people turn to black market marijuana because medical or recreational marijuana is still too hard to get or too expensive, it’s certainly something to watch.
We’ll be tracking all of the data in the Cannabiz Database. Sign up for daily alerts so you don’t miss any updates! And be sure to add your name to the growing list of people who want to be notified when the comprehensive reference guide, Tracking Marijuana Licenses State-by-State: 2017 Edition, is available!
Susan Gunelius, Lead Analyst for Cannabiz Media and author of Marijuana Licensing Reference Guide: 2017 Edition, is also President & CEO of KeySplash Creative, Inc., a marketing communications company offering, copywriting, content marketing, email marketing, social media marketing, and strategic branding services. She spent the first half of her 25-year career directing marketing programs for AT&T and HSBC. Today, her clients include household brands like Citigroup, Cox Communications, Intuit, and more as well as small businesses around the world. She has been working with clients in the cannabis industry since 2015. Susan has written 11 marketing-related books, including the highly popular Content Marketing for Dummies, 30-Minute Social Media Marketing, Kick-ass Copywriting in 10 Easy Steps, The Ultimate Guide to Email Marketing, and she is a popular marketing and branding keynote speaker. She is also a Certified Career Coach and Founder and Editor in Chief of Women on Business, an award-winning blog for business women. Susan holds a B.S. in marketing and an M.B.A in management and strategy.