How States Tax Medical Marijuana

How States Tax Medical Marijuana

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Since 1996, 28 states and the District of Columbia have legalized the use of marijuana for medical purposes. What those medical marijuana systems look like varies from state to state—including which patients are eligible to participate, whether medical marijuana can be smoked or must only be consumed as an edible or used topically, and whether and how medical marijuana is taxed. 

State Medical Marijuana Taxation

Ten states and D.C. have levied some sort of tax on medical marijuana—be it a specific sales tax on medical marijuana paid by the purchaser, an excise or privilege tax paid by the grower and/or seller, a surcharge paid by the seller, the application of a state-wide pharmaceutical rate, or the application of the same generic sales tax required for the purchase of any good. And while in some of those states, that tax money feeds into the same pot as all other tax revenues, others have carefully allocated it to fund the regulation of their medical marijuana systems, address public health concerns, provide for medical marijuana research, and/or assist law enforcement.

Here’s how each state taxes medical marijuana and to what, if anything, that money is specifically allocated:

Arizona
  • 6.6% medical marijuana sales tax.1
Colorado
  • 2.9% generic sales tax.2
Hawaii
  • 4.5% generic excise tax on Oahu.3
  • 4% generic excise tax everywhere else.4
Illinois
  • 1% sales tax under the state’s pharmaceutical rate.5
  • 7% privilege tax paid by sellers and growers.6
Maine
  • 5.5% medical marijuana sales tax.7
  • Allocated to the state’s general fund.8
Nevada
  • 2% medical marijuana excise tax.9
  • 75% allocated to the state’s general fund and 25% allocated to run the state’s medical marijuana program.
New Jersey
  • 7% generic sales tax.10
New York
  • 7% medical marijuana excise tax.11
  • Allocated to a state-run medical marijuana trust fund, which is then distributed in part to the counties in which the medical marijuana was manufactured and dispensed, the State Office of Alcoholism and Substance Abuse Services for additional drug abuse prevention, counseling, and treatment services, and to the Division of Criminal Justice Services for the support of related law enforcement measures.12
Pennsylvania
  • 5% medical marijuana excise tax.13
  • 55% allocated to the operations of the Department of Health; 10% to drug abuse prevention, counseling, and treatment services provided by the Department of Drug and Alcohol Programs; 30% to research relating to the safety and use of medical marijuana; and 5% to local police departments.
Rhode Island
  • 4% medical marijuana surcharge paid by the seller.
  • 7% generic sales tax.14
Washington, D.C.    
  • 5.75% generic sales tax.15

Conclusion

The medical marijuana systems and needs of each state are different, and the variety of ways in which they tax medical marijuana reflect that. States are acting responsibly and compassionately to structure their medical marijuana programs—and levy any taxes necessary—in ways that work best for their communities and allow them to effectively regulate a burgeoning new market. 

Topics
  • Marijuana23

Endnotes

  1. “Taxing Medical Marijuana in Arizona,” Arizona Hemp Center. Accessed March 17, 2017. Available at: http://mmjaz.com/Patients/arizona-medical-marijuana-tax.html.

  2. Colorado, Department of Revenue, “Marijuana Taxes Quick Answers.” Accessed March 17, 2017. Available at: https://www.colorado.gov/pacific/tax/marijuana-taxes-quick-answers.  

  3. “HB 321 Frequently Asked Questions,” The Medical Cannabis Coalition of Hawaii. Accessed March 17, 2017. Available at: http://mcchi.org/hb-321-frequently-asked-questions/.

  4. “HB 321 Frequently Asked Questions,” The Medical Cannabis Coalition of Hawaii. Accessed March 17, 2017. Available at: http://mcchi.org/hb-321-frequently-asked-questions/.

  5. Illinois, Department of Revenue, “Compassionate Use of Medical Cannabis Pilot Program Extended,” August 2016. Accessed March 17, 2017. Available at: http://tax.illinois.gov/Publications/Bulletins/2017/FY-2017-02.pdf.

  6. “Illinois Medical Marijuana Sales Tax,” Ansari Law Firm. Accessed March 17, 2017. Available at: http://www.irs-sales-tax-attorney-chicago.com/illinois-medical-marijuana-sales-tax/.

  7. Maine, Revenue Services, “Sales of Medical Marijuana and Related Products,” August 1, 2016. Accessed March 17, 2017. Available at: http://www.maine.gov/revenue/salesuse/Bull602016_08_01.pdf.

  8. Melina Robinson, “4 States Legalized Recreational Weed This Week—Here's How They'll Spend the Extra Tax Money,” Business Insider, November 12, 2016. Accessed March 17, 2017. Available at: http://www.businessinsider.com/recreational-marijuana-tax-revenue-allocation-2016-11/#nevada-will-take-the-money-to-its-schools-4.

  9. Nevada, State Legislature, “A.B. 70 – An Act Related to Medical Marijuana…” May 15, 2015. Accessed March 17, 2017. Available at: http://www.leg.state.nv.us/Session/78th2015/Reports/history.cfm?billname=AB70.

  10. Susan Livio, “N.J. to Tax Medical Marijuana, Christie Administration Says,” NJ.com, Accessed March 17, 2017. Available at: http://www.nj.com/politics/index.ssf/2012/11/nj_to_tax_medical_marijuana_ch.html

  11. New York, Office of Governor Andrew M. Cuomo, “Governor Cuomo Signs Bill to Establish Comprehensive Medical Marijuana Program,” Press Release, July 7, 2014. Accessed March 17, 2017. Available at: https://www.governor.ny.gov/news/governor-cuomo-signs-bill-establish-comprehensive-medical-marijuana-program.

  12. New York, Office of Governor Andrew M. Cuomo, “Governor Cuomo Signs Bill to Establish Comprehensive Medical Marijuana Program,” Press Release, July 7, 2014. Accessed March 17, 2017. Available at: https://www.governor.ny.gov/news/governor-cuomo-signs-bill-establish-comprehensive-medical-marijuana-program.

  13. Pennsylvania, Department of Revenue, “Medical Marijuana Tax Bulletin 16-001,” July 20, 2016. Accessed March 17, 2017. Available at: http://www.revenue.pa.gov/GeneralTaxInformation/TaxLawPoliciesBulletinsNotices/Documents/Tax%20Bulletins/Medical%20Marijuana/mm_bulletin_16-001.pdf.

  14. Rhode Island, Division of Taxation, “Emergency Regulation CCS 11-01 Compassion Center Surcharge.” Accessed March 17, 2017. Available at: http://www.tax.ri.gov/regulations/other/CCS-01.pdf

  15. Call with medical marijuana dispensaries in Washington, D.C.