Cannabis is the new must-have product in legal States, opening up an industry that didn’t exist before, and diverting money from the longstanding cannabis black market. But change doesn’t always come cheap, and depending on where you live, the taxes are steep, and the price of cannabis is skyrocketing.
About 10 years ago I used to pay about $50 for an 1/8 of good stuff in New York. Around that time, I could get that same 1/8 in Oregon for $10-15 less, highlighting one of the big price differences that has often existed for cannabis between the East and West coasts of the US, a standard that could be changed or erased by the inclusion of a legal cannabis market.
The last operation I ordered from before leaving New York was called Rockstar Deliveries, complete with business cards emblazoned with two guitars. Those same dreadlocked guys that came to my house via the trains, and pulled bags out of the crotches of their pants to present me with my options, now have to compete with a friendly, well-lit, out-in-the-open store where a person can saunter in, gaze at tons of options, and then be helped to making a purchase. Things have changed, and that includes prices.
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One of the things to know about legal cannabis markets is that they all operate differently, and this can mean having two very different models at work within the same country. In the US, every legal state has its own system for regulating, taxing, and pricing marijuana, and this leads to large overall discrepancies between locations in how much the product costs.
When getting into tax structures, in the US there are 10 to look at: Alaska, California, Colorado, Illinois, Michigan, Massachusetts, Nevada, Oregon, Washington, and Maine. Maine and Vermont are both legal states, but legalizing and establishing a regulated market are two separate things, often with a time gap in between.
Both states will have operational markets soon enough, but as of right now do not. While there is no information on how Vermont will set up its system, Maine’s market – which was postponed because of Corona – is likely to open its retail market later this year, and does have published information on its structural setup.
Washington DC almost made it to the list, but no matter how liberal it gets there, as the home of the US federal government, there’s no way for a legal market to exist. DC, in that way, actually becomes one of the most interesting locations, legalizing possession and cultivation, while buying and selling are still illegal. As such, it is not included on this list.
Taxes, taxes, and more taxes
One of the best ways to see differences in total cost, is to simply look at the taxes being applied. In the case of cannabis, the taxes are substantial in amount, varied by location, and they have a huge impact on the price paid by consumers. Between the current legal markets, the following taxes are applied.
Excise tax – A tax levied at the sales level for specific products, essentially like a sales tax. This is a local tax, and is often simply included in the price of an item. Excise taxes are imposed by local governments, but not always collected by them, instead traded off between merchants and wholesalers. At other times it is collected by the government as a sales tax.
Sales tax – This is a government-imposed tax at the point of sale which is collected by the government, and which is determined as a percentage of a sale item, though the rate collected varies between locations.
Cultivation tax – A tax applied to all cannabis cultivated for the purpose of medicinal or recreational use. The tax is paid at the time of transfer between the manufacturer and distributer.
Local cannabis business tax – A tax on non-medical cannabis businesses.
Tax breakdown by State
So here goes for the breakdown of the taxable US cannabis markets:
California has the largest legal cannabis market in the world, and also some of the highest taxes. Cannabis products are hit with a 15% excise tax, a cultivation tax of $9.65/oz of flower, a sales tax of 7.25%, and a local sales tax of 1%. In case it needs to be said, this is a massive amount of taxation, and lends much credence to the idea that legal cannabis markets can’t compete with black markets because of the price.
Oregon has significantly fewer taxes on its cannabis products, but still taxes it at a high rate with a sales tax of 17%. Some Oregon locations add on an additional 3%.
Washington State has the largest single tax, adding on an additional 37% as an excise sales tax. This excise tax gets paid to the Washington State Liquor and Cannabis Board, making it an excise tax that goes directly to the government, much like a standard sales tax. This replaces the regular state sale’s tax rate of 6.5%.
In Nevada your cannabis is subject to two taxes, a 15% excise tax, and a 10% sales tax.
Michigan, much like Nevada, charges both an excise tax and a sales tax, 10% and 6% respectively.
Colorado takes a total of 30%, split evenly between a sales tax and an excise tax. The excise tax is included in the price, as it is levied on transfers between cannabis production facilities and retail stores.
Massachusetts adds on either 2-3 taxes. A 6.25% sales tax, a 10.75% excise tax, and if in the right location, an additional 3% in local taxes.
Alaska’s cannabis tax system looks a bit different. Rather than using percentages, Alaska charges taxes in dollar amounts that get paid by growers. The rates are: $50/oz of mature flowers, $25/oz immature flowers, $15/oz for trim, and $1/clone. It is the only state without a sales or excise tax, though local taxes can be added per municipality. An example of this is Anchorage, which adds on an additional 5% tax.
Illinois, like Alaska, adopted a more irregular system of taxation. Cannabis products coming from cultivation centers (or craft growers) have a 7% excise tax added on that the customer never sees, a sales tax of 6.25%, and local taxes that can be up to 3.5%. And then Illinois gets a bit wonky, adding an additional retail tax which is dependent on the potency of the product being bought. This goes as follows:
- Products with less than 35% THC are taxed at 10%.
- Products that are infused with cannabis, like edibles, are taxed at 20%.
- Products with more than 35% THC are taxed at 25%.
If this is all a bit confusing, the takeaway number for total taxation is about 19.55 – 34.75%.
Maine’s legal retail cannabis market has yet to open, but data has been released on the tax structure that will be applied with a sales tax of 10%, and an excise tax of 15% on the transfer from a cultivation center. However, according to other sources, the excise tax is not a percentage, but a dollar amount that goes as follows: $335/lb for dry flower, $94/lb for trim, $1.50/seedling, and $.30/seed. When the market actually opens, the method of excise taxation can be confirmed.
Cannabis was legalized in Maine by a 2016 bill, and originally its retail market was supposed to open in 2018, until it hit a snag in November of 2017 when governor Paul Lepage vetoed a bill to tax and regulate it. The veto was overturned in 2018, and the bill was not put into law until then, which helps explain the years long delay in starting operations.
If you’ll notice, I’m not giving you any direct prices, and the reason should be obvious – they’re all over the board, even in a specific state. The size of the taxes say quite a bit though. I have yet to hear of, or see, an original untaxed price anywhere below a black market price. Now, remember that $50 per an 1/8 on the East coast and $35-40 on the West? That price range hasn’t changed substantially, and this can be seen in medical cannabis products that aren’t taxed like adult-use products.
The black market price has remained about the same, and the black market price is the lowest base out there. So, go ahead, look at the State you’re in, and then drill down to your specific city or municipality. Add on every tax mentioned to your standard black market price, and there you have it.
Which state is the priciest? All of them!
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