States have taken a variety of approaches to legalizing, regulating, and taxing cannabis — including the method and rate of taxation. The states with the highest taxes on cannabis are Alaska and Washington state. In Washington, the total tax on retail sales can be as high as 47.4% with local taxes factored in. Meanwhile, Alaska imposes a $50/ounce tax on cultivation, meaning the effective tax rate goes up as prices drop. At the lower end of the spectrum, Maryland imposes a more modest 12% retail tax on cannabis.
High taxes can make it difficult for legal businesses to compete with illicit sales, and undermine the goal of moving sales to the regulated cannabis market. They can also drive customers across state lines to jurisdictions with more reasonable rates.
State
Wholesale Excise Tax Rate
Retail Excise Tax Rate
Standard Sales Tax (if sales tax applies to cannabis)
Local Sales Tax Rates
Applicable to Medical?
Alaska
Flower: $50/oz ($25/oz. for abnormal bud) Trim: $15/oz
N/A
N/A
Some local cannabis- specific taxes
N/A — Medical law does not include sales.
Arizona
N/A
16%
5.6% Transaction Privilege Tax
Yes. Varies and can be up to 5.6%.
No, abut the 5.6% tax applies to medical, plus optional 2-3% local tax
California
N/A
15%
7.25%
Standard local taxes of up to 3%; some local cannabis-specific taxes
Partially, the 15% retail excise tax applies. Sales taxes do not apply to registered patients.
Colorado
15%
15%
N/A
Standard local taxes of up to 6%; some local cannabis- specific taxes
Registered patients are exempt from 15% retail excise tax, but most pay 2.9% standard sales tax
