A weed of many names-cannabis, marijuana, MJ, pot, ganja or just weed, to name a few. Regardless of what it's called, there is no question it's having a moment in the United States right now. Since recreational marijuana was first legalized in Colorado in 2012, another 23 states have followed suit. Today, nearly half the states have legalized recreational marijuana use and an additional 38 states allow marijuana use for medicinal purposes.
Along with the legalization of marijuana, states have collected millions of dollars in tax revenue. While revenue collected from marijuana is only a drop in the bucket of a state's total budget, these taxes have become an important source of funding for various projects.
What Taxes are Levied on Marijuana?
All states tax the sale of cannabis. They have the flexibility to levy sales taxes, excise taxes, or both. The rates at which states tax cannabis cover a broad range, from 5% up to 37% on the sale price of the product. However, not all states levy a tax as a percentage of the price. There are a handful of states that tax marijuana by weight or by the content of tetrahydrocannabinol (THC) in the product.
Where Do the Taxes Go?
The most popular allocation of cannabis tax collections is for the costs of overseeing and regulating the cannabis market. Twelve states allocate money towards this purpose. The second most common recipient of cannabis taxes are state general funds. Eleven states and the Virgin Islands dedicate a portion of their tax collections to the general fund. New Mexico is the only state to allocate the entirety of cannabis taxes to its general fund. Other common recipients of cannabis tax revenue include state and local governments, substance misuse treatment programs, education and public safety.
Read below for details on how states dedicate funds collected from taxes on cannabis.