Marijuana Taxes And Revenue For The States

There were numerous tax initiatives on ballots across the United States this year. One of the major tax initiatives was the legalization of marijuana and its subsequent taxing in eight states during the 2016 November election. Prior to the November elections, there were 26 states and the District of Columbia who legalized the use of marijuana, whether in the form of recreational use or medical use only. Now,California, Massachusetts, Nevada and Maine have all voted to allow the use of recreational marijuana. (As of now, the margin of victory in Maine is less than 1.5%, which means there will be a recount that does not affect the taxpayers.)

In California, the legalization imposes a 15% tax on retail marijuana sales, as well as processor-level cultivation taxes of $9.25 per ounce on flowers and $2.75 per ounce, plus taxes collected at the local level. The first $25 million raised would be spent on health and law enforcement expenses related to legalization, with the rest of the revenue divided amongst youth drug education and treatment (60%), environmental programs (20%), and programs to reduce driving under the influence (20%).

In Massachusetts, there is going to be only a 3.75% tax. That tax though is added on top of an already imposed sales tax of 6.25%. The revenue created is to be split between the state general fund and regulatory costs.

In Nevada, a 15% tax will be added to wholesale marijuana sales, plus licensing fees, and retail-level state and local sales taxes. The revenue generated is scheduled to be used for costs of administration and regulation, with the remainder used for education funding.

If the results of Maine hold, there would be a 10% tax on sales with the revenue going mostly to the state’s general fund (98%) and the remainder to individual cities and towns (2%). Maine is already a state that passed the use of medical marijuana.

On the other end of the spectrum, Arizona voted against the legalization. The measure would have tacked on a 15% tax the sale of marijuana, with the revenue split 50-50 between state and city jurisdictions. The state money was slated to be used for educational and public health programs.

California, Nevada, Massachusetts, and possibly Maine, now join Colorado, Washington, Oregon, the District of Columbia, and Alaska as states that allow for recreational use of marijuana. This represents about one-fifth of the population of the United States that now can partake in the use of recreational marijuana.

I am an Editorial Associate at TaxConnections providing you with tax news from around the world.


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