Taxes are a key piece to the cannabis legalization puzzle. Those in favor of making weed legal often cite it as one of the main benefits of legalization. And it is always one of the questions under debate when a state thinks about changing its cannabis laws.
But how much tax are you actually paying on your weed, and is it too high? To answer that you have to know how things work in your state.
Weed Taxes Differ By State
The tax you pay on legal weed will be different depending on where you live. Each state comes up with their own system for regulating and taxing cannabis. Here’s a state-by-state breakdown of weed taxes.
California voted to legalize recreational weed last fall. When the state’s recreational program is fully operational next year, there will be a 15 percent tax on top of other local sales taxes. In addition, the state will tax cultivators at the rate of $9.25 per ounce of flower and $2.75 per ounce of leaves.
Colorado’s weed taxes are a little bit confusing. There is a 15 percent excise tax. This one kicks in when the producer sells it to a dispensary, and it is generally included in the final retail price that you pay. When you buy your bud, you will pay a 10 percent tax for recreational weed along with the regular 2.9 percent state sales tax.
In Maine, the current tax on recreational weed is set at 10 percent. That 10 percent will be on top of the state’s standard 5.5 percent sales tax.
The new laws in Massachusetts call for a 3.75 percent tax on recreational weed in addition to the regular 6.25 percent sales tax. Local cities and counties can also add on extra tax, as long as it doesn’t go above two percent.
Last year voters in Nevada approved The Nevada Marijuana Legalization Initiative. It called for a 15 percent tax on recreational weed.
According to the Oregon Liquor Control Commission’s website, there is a base tax of 17 percent on legal weed. In addition, city and county governments can add up to three percent more.
A couple years ago, Washington had a three-tier tax system on legal cannabis. Back then, there was a 25 percent tax on the producer, the processor, and the retailer. But in 2015, the state simplified the whole thing. Now, Washington state has a single 37 percent excise tax on legal weed at the point of sale.
What Happens To All That Money?
If you want to know if you are paying too much on weed taxes, you have to know what is actually happening with all that money. And once again, it differs based on the state where you buy your weed.
Half of the weed taxes generated in Alaska go to the state’s general fund. The other half is used to fund programs working to lower recidivism rates.
Here’s how California plans to spend the money it makes from taxing recreational weed:
- $10 million will be spent on efforts to study legalization
- $2 million will fund medical marijuana research
- $3 million with be spent on efforts to establish DUI rules in the state
- The state will invest $10 million per year—increasing every year by another $10 million until it maxes out at $50 million per year—in communities most affected by the War on Drugs.
- The remaining funds will be chopped up between youth drug prevention programs, environmental protection programs, and law enforcement.
In Colorado, a big chunk of weed taxes goes to fund public schools. A lot of the money is also divided up between local governments, which can choose how to spend it. Some spend it on programs to fight homelessness. Others create scholarships with it, give more funds to police, or help maintain drug abuse prevention programs and other public services.
Tax money from recreational cannabis will go into Maine’s general fund. From there it will be divided between educational programs, other public services, and law enforcement training.
Massachusetts will use money from weed taxes to fund schools, improve veteran services, train law enforcement agencies, and build up drug treatment programs.
Nevada plans to use the bulk of tax revenues for the state’s general fund and to support schools and education. It will also use some of the tax money to help run the state’s legal cannabis programs.
Here’s how Oregon spends the taxes it makes from weed:
- 40 percent goes to fund schools
- 20 percent helps the Mental Health Alcoholism and Drug Services
- 15 percent goes to the state police
- 10 percent goes to local cities
- 10 percent to counties
- 5 percent to state alcohol and drug abuse programs
In Washington, more than 60 percent of cannabis taxes are spent on public health programs. Another portion goes to the Liquor and Cannabis Board, to help the agency administer the state’s cannabis programs. The rest of it goes into the state’s general fund to add to its overall budget.
The Final Hit: Is It Worth It?
Ultimately, you might feel that it’s worth paying the extra taxes to fund these different state programs and services. But even if you don’t like the way your state uses weed taxes, you may still have to get on board with paying the additional taxes since the ability to tax weed is one of the key reasons states choose to make cannabis legal.
Put simply, it would be much harder for the legalization movement to be successful if states couldn’t make some extra money by taxing cannabis. The bottom line: If you like having access to legal weed, it looks like high taxes are just part of the price you’ll have to pay.