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Marijuana tax


In the United States (US), the possession of cannabis is illegal under the Federal Controlled Substances Act of 1970. In contrast to the Federal Law, 33 US states have legalised the medical use of marijuana, and 16 states have recreational use. 2014 Colorado was the first US state to legalise recreational marijuana sales. Over 12% of adult Americans smoke marijuana every month. The highest consumers of cannabis burn the product every day, consuming 20 ounces pa, and account for 70% of annual consumption.

In 2022 the US legal marijuana market was worth $20 billion pa, and the illegal market $60 billion. The legal marijuana market is expected to exceed $40 billion by 2025.

Marijuana is taxed by the different US states in different ways and generated exercise tax revenues of over $2 billion in 2020. Most US states tax based on price, several on weight, and Illinois, by THC content (THC, or tetrahydrocannabinol, is the chemical responsible for most of marijuana’s psychological effects).

The marijuana tax can take different forms, including:

  • Excise Tax: This is a tax imposed on the sale or transfer of a specific product, such as marijuana or marijuana-infused products. It is typically a percentage of the product’s retail price or a fixed amount per unit sold.
  • Sales Tax: This general tax applies to selling goods and services, including marijuana products. It is usually calculated as a percentage of the purchase price.
  • Cultivation Tax: Some areas impose a tax on the cultivation or production of marijuana. This tax is typically based on the weight or quantity of marijuana plants or products produced.
  • Licensing Fees: In addition to taxes, businesses involved in the marijuana industry often need to obtain licenses and permits.

The legalisation of marijuana is an attempt to move illegal trade into a legal marketplace so that illegal trade declines. This only occurs if legal cannabis is priced comparatively to the illicit product. As such, governments need to ensure their taxes don’t kill off the legal marijuana industry. In the US, the price of marijuana flower averages $280 per ounce.