Ever thought about opening a recreational marijuana dispensary? You may first want to know which states levy the lowest taxes.
As marijuana is not legal on a federal level, regulations on selling it vary widely from state to state. This means every state taxes cannabis products differently.
According to a 2021 report from the Chamber of Commerce, the two states with the lightest taxes levied on cannabis dispensaries are Michigan, with a sales tax of 10% and no additional taxes, and Massachusetts, with a sales tax of 10.75% and no additional taxes.
Spokesperson for the Chamber of Commerce, Olivia Thomson, told GreenState that the structure of cannabis taxation in these states can also make it easier for cannabis businesses to be successful.
“Due to their easy-to-follow tax structure and, in some cases, the higher cost to the consumer in these states, you can ultimately net more profit per sale in Massachusetts and Michigan. Other factors come into play when owning a business of course, like market saturation and local demand, but these states are the easiest according to tax cost and structure,” she explained.
The Chamber of Commerce reports the states with the highest taxes on cannabis are Washington, with a 35% sales tax. After comes California, with a 15% sales tax and additional weight-based taxes on cannabis products ($9.65/oz. for flower, $2.87/oz. for leaves cultivation tax, and $1.35/oz for cannabis plant). Following California is Colorado, with a 15% sales tax and a 15% excise tax (i.e. an additional tax specific to cannabis products,) and then Nevada, with a 10% sales tax and a 15% excise tax.
“While states like California have extensive and increasingly difficult bureaucratic barriers to entry, Colorado, despite its relatively higher taxes, has been actively accepting and expanding its cannabis market,” Thomson said. “Given Colorado’s long history with cannabis businesses, they seem to be one of the most supportive states in the U.S. for starting a cannabis business, despite their relatively higher taxes.”
“Dispensary taxes are important, but they should not be the main deciding factor if you are choosing where to launch your business,” Thomson also added. “As mentioned earlier, it is because of the slightly higher taxes in Colorado that industry-expanding initiatives like the CBO are possible. Nevertheless, certain states are charging too high of a price with no justification.”