Despite the fact that the federal government considers them illegal, cannabis businesses still pay their taxes, both to their home state and Uncle Sam. Ultimately, those costs trickle down to consumers in the form of higher prices on cannabis products, whether consumers pay sales tax on those products or not. Of course, tax rates differ across states. Different segments of the industry pay different taxes, too. And that makes states with tax-free cannabis sales rare birds, indeed. Here’s which ones they are.
States With Tax-Free Cannabis for Medical Patients
Generally, medical cannabis patients pay lower tax rates than adult retail consumers. And in some states, medical cannabis patients don’t pay any tax on dispensary purchases at all. Rather, taxes are usually paid by cultivators who sell cannabis to dispensaries or manufacturers.
Here’s a complete list of states with tax-free cannabis for registered medical patients.
- Alaska patients pay no tax, but there is a $50 per ounce tax on flower and $15 per oz of trimmings on wholesale purchases.
- California medical cannabis patients don’t have to pay the retail and additional excise tax non-medical buyers do.
- Delaware‘s Medical Marijuana Act stipulates that there shall be no tax collected on dispensary purchases by registered patients.
- D.C. isn’t a U.S. state, but the District of Columbia has tax-free medical cannabis.
- Maine residents have to pay a 10 percent sales tax on retail sales, but medical patients pay no tax.
- Massachusetts medical cannabis patients are exempt from the retail, state and municipality taxes other buyers pay on cannabis.
- New Hampshire‘s Therapeutic Cannabis Program does not impose a tax on medical cannabis sales.
- New Mexico added no new taxes for medical cannabis patients.
- North Dakota‘s House Bill 1430 does not levy a tax on dispensary sales to medical patients.
- Oregon tax rates for retail sales can be as high as 20 percent, but not for medical cannabis patients, who pay no tax.
- Vermont‘s sale and use tax doesn’t apply to medical cannabis.
- West Virginia‘s Senate Bill 386 imposes a 10 percent excise tax on wholesale cannabis, but medical patients don’t pay tax at point of sale.
Any states with medical cannabis not included in this list place a tax on medical cannabis purchases by patients and/or licensed caregivers.
Are There Adult-Use States With Tax-Free Cannabis Sales?
Unfortunately, there isn’t a single state that doesn’t charge sales tax for adult-use purchases. In some states, the tax on retail cannabis purchases is simply the same as the local sales tax rate. In some places, however, like Massachusetts, there are additional taxes on top of the standard sales tax. Other states, like Oregon, let municipalities opt in or out of the additional tax on cannabis.
Furthermore, in states that have separate regulations for their medical and adult-use cannabis industries, cultivators and manufacturers can pay high excise taxes that can end up raising prices for consumers even further. Often, weed prices like $20 for a single gram, common for higher-end flower in many shops, are more a reflection of businesses overhead costs than they are of limited supply.