Marijuana Tax Facts (Updated 10/28/14)
Cannabis tax revenues are shaping up to be a huge resource for states with a regulated, licensed cultivation, dispensary or processor program in place. Below is a list of the current and state tax laws by regulated state.
State Application and/or Registration Fee Taxes
Currently no taxes in place pending results of The Campaign to Regulate Marijuana Like Alcohol in Alaska, an initiative committee formed to support a ballot measure entitled, “An Act to tax and regulate the production, sale, and use of marijuana.” As the title suggests, the measure would make the possession of marijuana legal for adults 21 years of age or older, and it would establish a regulated system of marijuana cultivation and sales.
For more information visit: http://regulatemarijuanainalaska.org/full-initiative-text/
A dispensary will owe state, county, and any applicable local retail transaction privilege tax (Arizona’s version of sales tax) on receipts from its sales of medical marijuana and any other products it may sell to consumers. As with any retail business, the dispensary is allowed to pass the amount of the tax on to its customers. Note that there is no additional or special tax on medical marijuana at this time.
- $5,000 for an initial dispensary registration certificate.
- $1,000 for a renewal dispensary registration certificate.
- $2,500 to change the location of a dispensary or cultivation facility.
- $10 to amend, change, or replace a registry identification card.
5.6% sales tax
For more information visit: http://www.azdhs.gov/medicalmarijuana/faqs/index.php?pg=qualifying-patients
What is the California State Board of Equalization (BOE) policy regarding sales of medical marijuana?
The sale of medical marijuana has always been considered taxable. However, prior to October 2005, the BOE did not issue seller’s permits to sellers of property that could be considered illegal. A policy change was issued in October 2005 and the Board directed BOE staff to issue seller’s permits regardless of the fact that the property being sold may be illegal, or because the applicant for the permit did not indicate what products it sold.
How many dispensaries are registered with the BOE?
All sellers of medical marijuana are required to hold a seller’s permit. However, the BOE does not have actual numbers for sellers of medical marijuana because dispensaries are not required to identify their business type when registering for a selling permit and can report total taxable sales without categorizing the specific product sold.
How much sales tax revenue is generated from medical marijuana dispensaries in California?
The BOE estimates the total sales of medical marijuana range between $700 million and $1.3 billion, resulting in $58 to $105 million in sales tax annually. This estimate is from December of 2009 and is based on 2007 BOE receipts from businesses that were identified as dispensaries in BOE records, extrapolated to the possible number of dispensaries operating in the state at an average sales tax rate of 8.38%.
Are there more current figures regarding revenue from marijuana dispensaries?
In 2013, the BOE reviewed more recent data and determined that this range of revenue continues to be the most accurate set of estimates given the information available.
Where does the sales tax levied on marijuana sellers go?
The sales tax for medical marijuana revenue goes to the state’s General Fund as well as cities, counties, and other local jurisdictions where the sale was made.
Are these tax revenues tied to any specific programs in the state budget?
No. The tax from the sale of medical marijuana is treated the same as the tax received from the sale of all tangible personal property.
Varies, all licensing is local7.
5% state sales tax, also local taxes
For more information visit: http://www.boe.ca.gov/news/marijuana.htm
Colorado Ballot Measure – Proposition AA
Sales tax: Beginning January 1, 2014, the bill imposes a tax of 15% on the sale of retail marijuana or retail marijuana products to a consumer by a retail marijuana store. The tax imposed is in addition to the2.9% state sales tax and any local government sales tax that is imposed on the sale of all property and services pursuant to current law.
On or after January 1, 2014, the general assembly is authorized to establish a rate that is lower than 15% by a bill enacted by the general assembly and signed into law by the governor. After establishing a tax rate that is lower that 15% the general assembly may increase the rate by
bill enacted by the general assembly and signed into law by the governor,so long as the rate does not exceed 15%. An increase in the rate does not require additional voter approval.
A retail marijuana store is required to add the tax imposed as a separate and distinct item, and when added, the tax constitutes a part of the total price of the retail marijuana or retail marijuana products purchased. A retail marijuana store is required to collect and remit the tax
to the department in the same manner as the state sales tax is collected and remitted to the department pursuant to current law.
Of the revenues collected pursuant to the 15% sales tax, 10% will be distributed to each local government in the state that has one or more retail marijuana stores within its boundaries. Each local government’s share of the revenues collected shall be apportioned according to the
percentage of retail marijuana and retail marijuana products sales tax revenues collected by the department in the local government as compared to the total retail marijuana and retail marijuana products sales tax collections that may be allocated to all local governments in the state. The remaining revenues shall be deposited in the marijuana cash fund and appropriated as directed by the general assembly.
Excise tax: Beginning January 1, 2014, the bill imposes a tax on the sale or transfer of unprocessed retail marijuana by a retail marijuana cultivation facility to a retail marijuana store, retail marijuana product manufacturing facility, or another retail marijuana cultivation facility. The amount of the tax is 15% of the average market rate of unprocessed retail marijuana statewide on the date that it is sold or transferred, as determined by the department, and the tax is imposed when a retail marijuana cultivation facility sells or transfers unprocessed retail
marijuana to a retail marijuana store, a retail marijuana product manufacturing facility or another retail marijuana cultivation facility.
On or after January 1, 2014, the general assembly is authorized to establish a rate that is lower than 15% of the average market rate by a bill enacted by the general assembly and signed into law by the governor.After establishing a tax rate that is lower that 15% the general assembly may increase the rate by bill enacted by the general assembly and signed-2- HB13-1318 into law by the governor, so long as the rate does not exceed 15%. An increase in the rate does not require additional voter approval.
The bill specifies that every retail marijuana cultivation facility is required to keep certain records regarding the sale or transfer of unprocessed retail marijuana and is required to collect and remit the tax to the department.As required by section 16 of article XVIII of the state constitution,the bill specifies that the first $40 million received and collected in payment of the excise tax on unprocessed retail marijuana shall be transferred to the public school capital construction assistance fund currently created in law. Any amount remaining after the transfer shall be transferred to the marijuana cash fund.
Revenue and spending limitations: The bill allows the state to collect and spend any revenues generated by the retail marijuana sales tax and retail marijuana excise tax as voter approved revenue changes.Submission of ballot questions by the secretary of state: The bill requires the secretary of state to submit a ballot question at the statewide election to be held in November 2013 asking the voters to:
Allow the general assembly to impose a retail marijuana sales tax at a rate not to exceed 15% of the sale of retail marijuana and retail marijuana products;
Allow the general assembly to impose a retail excise tax at a rate not to exceed 15% of the average market rate of unprocessed retail marijuana on unprocessed retail marijuana at the time when a retail marijuana cultivation facility sells or transfers retail marijuana to a retail marijuana product manufacturing facility, a retail marijuana store, or another retail marijuana cultivation facility;
Allow the general assembly to decrease or increase the rate of either tax without further voter approval so long as the rate does not exceed 15% for either tax; and! Allow any additional tax revenue to be collected and spent not withstanding any limitations in TABOR or any other
Marijuana cash fund: The bill changes the name of the existing medical marijuana license cash fund to the marijuana cash fund.The bill specifies that the sale of marijuana or marijuana products by a medical marijuana center to a consumer and the sale or transfer of unprocessed marijuana by a marijuana cultivation facility to a medical marijuana center are not subject to either tax. The department of revenue(department) is required to promulgate rules for the implementation of both taxes.
Shall State Taxes be increased by $70,000,000 annually in the first full fiscal year and by such amounts as are raised annually thereafter by imposing an excise tax of 15% when unprocessed retail marijuana is first sold or transferred by a retail marijuana cultivation facility with the first $40,000,000 of tax revenues being used for public school capital construction as required by the state Constitution, and by imposing an additional sales tax of 10% on the sale of retail marijuana and retail marijuana products with the tax revenues being used to fund the enforcement of regulations on the retail marijuana industry and other costs related to the implementation of the use and regulation of retail marijuana as approved by the voters, with the rate of either or both taxes being allowed to b decreased or increased without further voter approval so long as the rate of either tax does not exceed 15%, and with the resulting tax revenue being allowed to be collected and spent notwithstanding any limitations provided by law?
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Fees proposed by the regulatory agency:
$1,000 dispensary facility application fee;
$5,000/year fee for dispensary facility;
$25,000 application fee for producers;
$75,000/year fee for producers
6.35% state sales tax Applies
Legalization of Medical Marijuana: Although this legislation does not specifically amend any provision within Title 12 of the Connecticut General Statutes, there are tax implications that stem from its provisions.
Summary of legislation: A licensed physician may certify an adult patient’s use of marijuana after determining that the patient has a debilitating medical condition and could potentially benefit from the use of marijuana to provide relief from symptoms of that medical condition. Patients seeking to use marijuana for relief from symptoms of a medical condition must have a written certification by a physician and register with Department of Consumer Protection (DCP). Qualifying patients and their primary caregivers may possess a combined one-month marijuana supply.
The legislation establishes who can be primary caregivers and requires them to register with DCP. Registry information is generally confidential and not subject to disclosure under the Freedom of Information Act (FOIA), but may be disclosed for specified purposes (e.g., to law enforcement officials for investigating and prosecuting crime).
Pharmacists (termed “dispensaries”) are subjected to licensing requirements to supply marijuana and producers are subjected to licensing requirements to grow it. DCP must adopt regulations that set the maximum number of dispensaries and producers (the number of producers must be at least three but no more than 10), create licensing, and set standards.
Patients, their caregivers or doctors, dispensaries, or producers may not be subject to criminal or civil penalties, or denied any right or privilege, for specified actions relating to therapeutic marijuana use. Caregivers are only protected from these punishments if they obtained marijuana from a licensed dispensary. The same restriction does not apply to patients.
Protections for patients will not apply in specific settings, such as at work, at school, in public places, in moving vehicles, or in front of children.
For the most part, this legislation is effective October 1, 2012 although some sections are effective upon passage. However, DCP may only license a dispensary on and after the effective date of the regulations it adopts in accordance with this act.
Products and Prices
To be licensed to grow marijuana and produce medical marijuana products, applicants must put $2 million in escrow with the state, which will be gradually reduced over five years as the licensee hits certain milestones.Producers also will have to pay a $25,000 application fee and a $75,000 license fee. (The application fee for a dispensary facility permit will be $1,000, plus an additional $5,000 upon approval.)
Sales and Use Tax Implications: Sales of marijuana by licensed dispensaries (see below) will be subject to sales and use taxes; the sales and use tax exemption for prescription medicine will not apply. Licensed dispensaries may purchase the marijuana from licensed producers on a resale basis.
Licensed producers may be able to claim a sales tax exemption under the provision commonly called the farmer tax exemption. This exemption allows entities engaged in agricultural production as a trade or business to be exempt from the sales and use tax for purchases of tangible personal property used exclusively for agricultural production.
Marijuana and Controlled Substances Tax Implications: Under the new legislation, the marijuana and controlled substances tax does not apply to persons in lawful possession of these drugs. Qualifying patients, physicians, primary caregivers, producers and dispensaries will be considered in lawful possession of marijuana, and therefore, not subject to the tax. However, anyone not in lawful possession of marijuana would be subject to the tax, in addition to other penalties.
For more information visit:http://www.ct.gov/drs/cwp/view.asp?A=1514&Q=510080
Will be determined by department rule
Gross receipts tax if above $1.2 million in revenue
7.6 Application for operation of a compassion center. Applicants shall only be accepted during an open application period announced by the Department and shall include the following items:
7.6.1 a non-refundable application fee, made payable to the Division of Public Health, Medical Marijuana Program, in the amount of $5,000;
7.10 Expiration, termination, or renewal of a registration certificate authorizing operation of a compassion center.
7.10.1 Expiration: A compassion center’s registration shall expire two years after its registration certificate is issued. The compassion center may submit a renewal application at any time beginning 90 days prior to the expiration of its registration certificate. Such renewal application must be submitted a minimum of 30 days prior to the expiration of its registration certificate to avoid suspension of the certificate.
7.10.2 Renewal: The Department shall grant a compassion center’s renewal application within 30 days of its submission if the following conditions are all satisfied.
126.96.36.199 The compassion center submits materials required under Section 7.9 of these regulations, including a $40,000 fee, which shall be refunded if the renewal application is rejected;
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District of Columbia
$5,000 application fee for dispensaries and cultivators,
$3,000/year renewal fee;
$10,000/year fee for dispensaries;
$5,000/year fee for cultivators
6% sales tax
For more information visit: http://doh.dc.gov/sites/default/files/dc/sites/doh/publication/attachments/Rulemaking_for_MMP_2013.pdf
Currently a “grow your own” program
Fees will be determined by the department by rule, must cover costs
7% excise tax at wholesale level and 1% sales tax
For more information visit: http://www2.illinois.gov/gov/mcpp/Pages/Rules.aspx
$15,000 application fee,$14,000 refunded to applicants that aren’t chosen
5% sales tax and 7% meals and rooms taxon edible products
For more information visit: http://www.maine.gov/legis/lawlib/medmarij.html
The Marijuana Control Act of 2014
Medical marijuana can only be legally obtained from a licensed dispensary or directly from one of the 15 licensed medical marijuana growers.
Beginning June 1, 2016, the Commission may increase the number of licensed growers in order to meet demand and provide for patient access in “an affordable, accessible, secure, and efficient manner.
The legislation directs the Comptroller to develop regulations and licensing for four types of state-legal marijuana businesses — retail stores, cultivation facilities, marijuana product manufacturers, and testing facilities. Localities would have the right to regulate time, place, and manner, as well as provide input on licensing, which would be granted substantial weight. No more than one retailer for every 20,000 residents would be allowed, except that every county would have at least two retailers. Local governments could further restrict the number of marijuana businesses, as long as they were not completely prohibited.
The Marijuana Control Act of 2014 would impose an excise tax of $50 per ounce on the sale of marijuana by a cultivation facility, which would generate an estimated $91.3 million per year. The tax rate may be adjusted for inflation or deflation, based on the Consumer Price Index. The first $5 million of revenue raised annually would be directed towards drug addiction treatment and education.
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The health department proposed a $50,000 annual fee for dispensaries and $31,000 in fees for a two-stage application process.
Likely not taxed.
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Will be determined by department rule:
Maximum fees for initial registrations range from $3,000 for a cultivation facility to $30,000 for a dispensary; maximum renewal fees range from $1,000 to $3,000.
6.85% to 8.1% state and local sales tax likely applies
For more information visit: https://www.leg.state.nv.us/Session/77th2013/Bills/SB/SB374_EN.pdf
Fees will be set by the health department; they must cover costs
No State Sales tax.
For more information visit: http://www.dhhs.state.nh.us/oos/tcp/
$20,000 dispensary fee each year, $2,000 for unsuccessful applicants
7% sales tax
For more information visit: http://www.state.nj.us/health/medicalmarijuana/atc_faqs.shtml
$1,000 application fee for producers, annual producer fee from $5,000-$30,000
Gross receipts tax (5.125% to 8.8675%) depending on location in state)
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What are the Rules for People Who Want to Be Part of the Industry of Producing or Dispensing Medical Marijuana?
Registered organizations or “RO’s” are entities that the state licenses to produce and dispense medical marijuana.
Can be for-profit or not-for-profit organizations
Must contract with an independent laboratory approved by the Commissioner of Health for product testing
Cannot be managed by or employ anyone, who comes in direct contact with the marijuana, who has been convicted of felony drug charge within 10 years (unless they received a certificate of relief or good conduct)
Growing must be done indoors (which may include a greenhouse) in a secure facility
The Commissioner will not license more than 5 RO’s, which can each operate 4 dispensaries (for a total of 20 dispensaries)
Commissioner can add more RO’s if s/he determines a need
DOH will issue regulations for RO’s, including regulation governing security and tracking
How Do I Become a Registered Organization (RO)?
To apply to be an RO, the organizations must meet a range of criteria, including that they:
Have sufficient facilities and land or a bond of $2 million
Can maintain good security
Has entered into a labor peace agreement
Able to comply with all state laws
In determining who can be an RO, the Commissioner should consider the public interest – including regional access
The fee for RO’s is to be determined by the Commissioner
Licenses are valid for 2 years and then must be renewed
Licenses can be immediately suspended of terminated if the RO is not adequately controlling diversion or otherwise violating the statute or regulations.
What are the fees for participating?
Fees for producers and dispensaries are to be determined by the Health Commissioner
How Will Medical Marijuana Be Taxed?
Medical marijuana is taxed through an excise tax, which means that the Registered Organization pays the tax directly to the state
The law established a medical marijuana trust fund – 100% of revenue is to be deposited there
Excise tax of 7% will be levied on gross receipts and paid by the Registered Organization 22.5% goes to county were the medical marijuana was produced
22.5% goes to county were the medical marijuana was dispensed
5% goes to Office of Alcohol and Substance Abuse Services for prevention, counseling and treatment services
5% goes to the Department Criminal Justice Services for discretionary grant program related to enforcement of the this title
For more information visit: http://www.compassionatecareny.org/medical-marijuana/
Measure 91 Pending Nov 2014 Ballot vote
Fees will be determined by Health Authority rule.
No State Sales Tax
For more information visit:http://ballotpedia.org/Oregon_Legalized_Marijuana_Initiative,_Measure_91_%282014%29,_Full_text_of_measure
$250 application fee, $5,000 registration Fee
Compassion center surcharge of 4%; 7% state sales tax
For more information visit: http://www.tax.ri.gov/regulations/other/CCS-01.pdf
$2,500 application fee, $20,000 or $30,000 annual fee
Likely not taxed.
For more information visit: http://www.leg.state.vt.us/jfo/reports/2012-02%20Medical%20Marijuana%20Fee%20and%20Tax%20Report.pdf
Authorizing the Production, Processing and Retailing of Recreational Marijuana
On November 6, 2012, Washington State voters passed Initiative 502 (I-502). The initiative makes it legal for businesses holding the appropriate marijuana license(s) to produce, process, or make retail sales of marijuana for recreational use.
The Liquor Control Board (LCB) approves, regulates, and enforces marijuana licenses. For information on these topics, see LCB’s I-502 web page.
Taxes on marijuana-related businesses
- Administered by the Liquor Control Board
The initiative establishes a 25 percent excise tax on marijuana producers, processors, and retailers. These taxes will be administered by LCB.
- Administered by the Department of Revenue
The business & occupation (B&O) tax applies to producers, processors, and retailers of marijuana and marijuana-infused products.
Retail sales tax applies to sales of marijuana and marijuana-infused products to consumers.
The amount subject to the B&O tax and retail sales tax is the “selling price” (RCW 82.08.010). The selling price can include, but is not limited to:
- Cost of goods sold.
- Markup, which may include:
- The 25% marijuana excise tax imposed on the producer.
- The 25% marijuana excise tax imposed on the processor.
- The 25% marijuana excise tax imposed on the retailer.
- Business expenses.
- Additional markup for desired profit.
Marijuana/marijuana-infused products are not food or prescription drugs
Whether sold for recreational or medical purposes, marijuana and marijuana-infused products are not considered food or food ingredients, nor are they considered prescription drugs since they cannot be legally prescribed. Therefore, these products do not qualify for the food or prescription drug retail sales tax exemptions. (See our Special Notice – Sales of Medical Cannabis Remain Subject to Sales Tax.)
Marijuana sales to non-resident
Marijuana sales to non-resident are subject to retail sales tax. Since marijuana sold in Washington cannot be legally transported outside of this state, the sales tax exemption under RCW 82.08.0273 does not apply. That exemption is limited to goods used outside of Washington State.
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