Taxation of Cannabis
Skatt & Ekonomimars 09, 2022

Multistate Sales Tax on Cannabis

This chart indicates whether cannabis sold legally for medical or recreational use is subject to sales tax.

 

STATE CANNABIS COMMENTS CITATION
Alabama See comment However, Alabama does have an illegal drug tax, which is an excise tax on illegal possession, distribution, sales, use, and other transactions involving certain drugs or controlled substances. 

We recommend you contact Alabama Department of Revenue for more information. 
 
Arizona Taxable

Medical cannabis is subject to general state sales tax, as well as any applicable city or county taxes.

Adult use (non-medical) cannabis is subject to state and local general sales and use tax. Additionally, it is subject to a 16% state cannabis excise tax.

We recommend you reference cited authority for more information.

Ariz. Rev. Stat. §42-
5010
Arkansas See comment

A sale of usable cannabis is subject to state and local sales taxes at the same rate as other tangible personal property.

We recommend you reference cited authority for more information. 

Ark. Code Ann. §26-
57-1504
California Taxable

Sales and use tax applies to retail sales of cannabis and cannabis products.

A sales and use tax exemption applies to retail sales of medical cannabis, medical cannabis concentrate, edible medical cannabis products, and topical cannabis, as defined.

We recommend you reference cited authority for more information. 

Cal. Rev. & Tax. Code §34011, Cal. Rev. & Tax. Code §34012, Special Notice L-481, California State Board of Equalization, October 2016, Tax Guide for Medical Cannabis Businesses, California State Board of Equalization, November 2016
Colorado Taxable

Medical cannabis is subject to general sales tax. 

Retail (recreational) cannabis and cannabis infused products are subject to a 15% state retail marijuana sales tax, but exempt from the general sales tax. It is also subject to any applicable local option retail tax. 

Retail cannabis is also subject to a 15% excise tax on the Average Market Rate or contract price of retail cannabis.

We recommend you reference cited authority for more information. 

Colo. Rev. Stat. §39-26-104(1)(a), Colo. Rev. Stat. § 39-28.8-202 
Connecticut Taxable

Effective July 1, 2021, a state tax is imposed on retail sales of cannabis, cannabis plant material, and cannabis edible products by a cannabis or hybrid retailer or micro-cultivator, with certain exceptions. The tax rate is based on the product’s type and total THC reflected on its label as follows:

  • 0.625 cents per milligram of total THC for cannabis plant material;
  • 2.75 cents per milligram of total THC for cannabis edible products (i.e., products containing cannabis or cannabis concentrate, combined with other ingredients, that are intended to be ingested, including sublingual or oral absorption); and
  • 0.9 cents per milligram of total THC for cannabis, other than cannabis plant material or cannabis edible products.

In addition, a 3% municipal sales tax is imposed on the gross receipts from the sale of cannabis by a cannabis or hybrid retailer or micro-cultivator that must be administered in accordance with the state sales and use tax law.

Lastly, palliative cannabis is considered a nonprescription drug and is exempt from sales and use tax.

We recommend you reference cited authority for more information. 

 
District of Columbia Not Taxable

Federal law prohibits the sale of cannabis.

We recommend you reference cited authority for more information.

D.C. Code Ann. §47-
2002(a)(7)
Florida Exempt

Medical cannabis and cannabis delivery devices are exempt from sales and use tax.

We recommend you reference cited authority for more information.

Fla. Stat.
§212.08(2)(l)
Georgia N/A    
Hawaii Taxable

Exemption for prescription drugs does not apply to medical cannabis or manufactured medical cannabis product.

We recommend you reference cited authority for more information.

Haw. Rev. Stat.
§237-24.3(6)
Idaho N/A However, Idaho has an illegal drug stamp excise tax. 

We recommend you reference cited authority for more information. 
Idaho Code §63-4203, Idaho Code §63-4205 
Illinois Taxable

Both medical cannabis and adult use cannabis are subject to the retailers’ occupation tax. 

Medical cannabis is subject to state and local retailers’ occupation taxes at the same rate as other qualifying drugs, i.e., 1% state rate and is generally exempt from locally imposed retailers’ occupation taxes (except for Regional Transportation Authority and Metro-East Transit District retailers’ occupation taxes).

Adult use cannabis is subject to the state retailers’ occupation tax as well as local retailers’ occupation taxes in the same manner as other general merchandise. In addition, counties and municipalities may impose a local cannabis retailers’ occupation tax on retail sales of cannabis, other than medical cannabis, at specified rates.

Further, the following other types of taxes are due on sales of cannabis: cannabis cultivation privilege tax; medical cannabis cultivation privilege tax; and cannabis purchaser excise tax.

We recommend you reference cited authority for more information.

35 ILCS 120/2-10, Informational Bulletin FY 2020-12, Informational Bulletin FY 2020-16, Cannabis Tax Frequently Asked Questions 
Indiana N/A    
Iowa N/A  Medical cannabis (CBD oil with less than 3% THC) is subject to state sales tax.   
Kansas N/A    
Kentucky N/A    
Louisiana N/A Louisiana imposes an excise tax on cannabis and controlled dangerous substances and industrial hemp-derived CBD products.  
Maine Taxable

Medical cannabis is subject to sales tax at the state rate. Retail sales of adult use recreational cannabis, permissible as of May 2, 2018, will be subject to a special tax rate of 10%. 

We recommend you reference cited authority for more information. 

Me. Rev. Stat. Ann.
tit. 36, §1760(5)
Maryland Exempt We recommend you reference cited authority for more information. Md. Code Regs. 03.06.01.09
Massachusetts   Taxable

Retail cannabis sales are subject to the 6.25% state sales tax, 10.75% state excise tax, and up to 3% local option tax. 

Medical cannabis sold to a qualified purchaser is not subject to tax. 

We recommend you reference cited authority for more information. 

Mass. Gen. Laws ch.
64H, §6(l)
Michigan   Taxable

Medical cannabis is subject to sales tax

We recommend you reference cited authority for more information.

Mich. Comp. Laws
§333.27601 
 Minnesota See comments 

Medical cannabis is not subject to sales tax. Sales of non-medical marijuana or non-medical cannabis are subject to the general sales tax rate plus applicable local taxes even though it is currently unlawful to sell non-medical marijuana/non-medical cannabis. 

Also, cannabis is subject to the cannabis and controlled substances excise tax. any illegal cannabis or controlled substance must have a cannabis or controlled substance stamp on the package, purchased from the Department of Revenue.

Cannabidiol (CBD) products are subject to sales tax regardless of how they are sold. 


We recommend you reference cited authority for more information. 

CBD Products and Sales Tax, Tax Information on Medical Cannabis, Marijuana and Controlled Substance Tax, Minn. Stat. §297A.61(3) and (4), Minn. Stat. §297D.08, Unofficial department guidance 
 Mississippi  N/A  
 Missouri  Taxable

In addition to imposing sales and use tax on medical cannabis, a 4% medical cannabis tax is imposed on retail sales of cannabis for medical use that are sold at medical cannabis dispensary facilities in Missouri. 

We recommend you reference cited authority for more information. 

Sec. 1, Article XIV,
Missouri
Constitution, Medical
Marijuana, Missouri
Department of Revenue
Nebraska  N/A  
Nevada Taxable

Cannabis is subject to:

  • a wholesale cannabis tax of 15% on the fair market value at wholesale (set by the Dept. every 6 months); 
  • a retail cannabis tax of 10% on adult-use sales of cannabis and cannabis products

Medical cannabis users are exempt from paying the 10% retail excise tax. 

We recommend you reference cited authority for more information. 

Nev. Rev. Stat.
§372.105
New Jersey   Taxable The sales tax on medical cannabis dispensed by a medical cannabis dispensary or clinical registrant is being phased out. Currently, the rate is 2%. The rate will be reduced to 0% (completely exempt) beginning July 1, 2022. 

New Jersey voters approved a constitutional amendment that legalizes the recreational (non-medical) use of cannabis, by adults who are 21 years of age or older, effective January 1, 2021. All retail sales of cannabis products in the new adult cannabis market are only subject to the state’s sales tax. 

Optional social equity excise fee: An optional social equity excise fee can be imposed by the Cannabis Regulatory Commission on personal use cultivation activities by licensed cannabis cultivators, including those alternative treatment centers deemed to be, and actually issued, cultivation licenses. Medical cannabis cultivation activities would not be subject to the excise fee. Also, any sale by a cannabis cultivator for which the excise fee is imposed would be exempt from sales and use tax. 

Optional local cannabis transfer tax and user tax: A municipality may adopt an ordinance imposing a transfer tax on the sale of cannabis or cannabis items by a cannabis establishment that is located in the municipality. A local tax ordinance adopted must also include provisions for imposing a user tax, at the equivalent transfer tax rates, on any concurrent license holder operating more than one cannabis establishment. Any transaction for which the transfer tax or user tax is imposed, or could be imposed, other than those which generate receipts from the retail sales by cannabis retailers, are exempt from the sales and use tax.

We recommend you reference cited authority for more information.
N.J. Stat. Ann. §54:32B-3(a), TB-68, TB-104, New Jersey Constitution, Article IV, Sec. VII, Paragraph 13, Ch. 16 (A.B. 21), Laws 2021 
New Mexico  Taxable  Medical cannabis is currently subject to gross receipts tax. Recreational cannabis also legalized with commercial sales beginning no later than April 1, 2022; gross receipts tax will apply.

We recommend you reference cited authority for more information.  
N.M. Stat. Ann. §7-9-4
 New York  Exempt

Sales of medical cannabis and related products purchased to administer medical cannabis are exempt from sales tax. Instead, an excise tax is imposed on the gross receipts from the sale of medical cannabis by a registered organization to certified patients and designated caregivers. 

Effective April 1, 2022, sales of adult-use cannabis products are also exempt from sales and use tax. Instead, adult-use cannabis is subject to a retail level excise tax of 13% (9% state excise tax and 4% local excise tax) and an excise tax imposed and collected by distributors based on potency measured by the milligrams of THC (the active ingredient in cannabis) in the product, with different rates depending on final product type.

We recommend you reference cited authority for more information.

N.Y. Tax Law, §490, N.Y. Tax Law, §492, N.Y. Tax Law, §493, TSB-M-16(1)M 
North Carolina See comment

While there is no sales and use tax levied on cannabis, it is subject to the excise tax on controlled substances and cannabis. 


North Dakota N/A    
Ohio Taxable Medical cannabis is subject to sales tax. Ohio Rev. Code Ann.
§5739.01
Oklahoma Taxable

Sales of medical cannabis and medical cannabis products are subject to state and local sales taxes. 

We recommend you reference cited authority for more information.

Okla. Admin. Code
§710:65-19-216
Pennsylvania  Exempt

Gross receipts tax imposed on growers/processors.

We recommend you reference cited authority for more information. 

35 P.S.
§10231.901(e)
 Rhode Island Taxable    R.I. Gen. Laws §44-
18-7(15)
South Carolina N/A    
South Dakota See comments

On November 3, 2020, voters approved Initiated Measure 26, Medical Marijuana Initiative, allowing for legalization of medical marijuana.

Voters also passed Constitutional Amendment A, Marijuana Legalization Initiative, allowing for the legalization and taxation of adult-use (recreational) marijuana to be subject to a 15% excise tax.

South Dakota is currently working on implementation rules.

Additionally, there is a case pending before the South Dakota Supreme Court on the constitutionality of the amendment allowing recreational marijuana

 
Tennessee See comment  While there is no sales and use tax levied on cannabis, it is subject to the unauthorized substances tax.  
Texas  N/A    
Utah  Exempt

The sale by a licensed medical cannabis pharmacy of the following is exempt:

  • cannabis in a medicinal dosage form; or
  • a cannabis product in a medicinal dosage form

However, the sale of a medical cannabis device by a medical cannabis pharmacy is taxable.

We recommend you reference cited authority for more information.

Utah Code Ann. §59-
12-104.10
Vermont  Exempt Effective March 1, 2022, a cannabis excise tax of 14% of the sales price of each retail sale in Vermont is imposed on cannabis and cannabis products, including food or beverages.

We recommend you reference cited authority for more information. 
Vt. Stat. Ann. tit. 7, §7902, Vt. Stat. Ann. tit. 32, §9771, Vt. Stat. Ann. tit. 32, §9773, Unofficial Department guidance 
 Virginia  Exempt

Sales of cannabis made through a physician's prescription are exempt from sales and use tax.

Effective January 1, 2024, in addition to the sales and use tax, an excise tax of 21% is imposed on the sale in Virginia of any retail cannabis, retail cannabis products, cannabis paraphernalia sold by a retail cannabis store, non-retail cannabis, and non-retail cannabis products. Any locality may by ordinance impose a 3% tax on any sale taxable under the state cannabis tax.

We recommend you reference cited authority for more information.

23 Va. Admin. Code §10-210-940, Va. Code Ann. §4.1-1003, 2021 Legislative Summary (P.D. 21-79), Unofficial Department Guidance 

Washington  Taxable

Sales of recreational and medical cannabis are subject to tax at the general rate. Certain exemptions are available to retailers with medical cannabis endorsements.

We recommend you reference cited authority for more information. 

Wash. Rev. Code
§69.50.535, Wash.
Rev. Code
§82.08.9998, Special
Notice
West Virginia See comment 

A special medical cannabis tax is imposed at rate of 10% of gross receipts received by a grower/processor on sales to a dispensary. Tax is charged against and paid quarterly by the grower/processor. A sales tax may not be imposed on medical cannabis. 

We recommend you reference cited authority for more information.

W. Va. Code §16A-9-
1
Wisconsin Taxable  Cannabidiol (CBD) and hemp products taxed as tangible personal property. Products may be exempt if they are food or food ingredients.

We recommend you reference cited authority for more information.  
Wis. Stat. §77.52(1)(a), Wis. Stat. §77.54(20n)(a) 
 Wyoming N/A     

 

Source: Wolters Kluwer CCH® AnswerConnect, 2022
Permission for use granted.

Source: Wolters Kluwer CCH® AnswerConnect, 2021
Permission for use granted.
Carol Kokins-Graves
Senior Content Management Analyst

Carol Kokinis-Graves, an attorney, is a senior content management analyst in the Indirect Tax Group at Wolters Kluwer Tax & Accounting. She has spent more than 23 years analyzing and reporting state and local sales and use tax legislation, court cases, department of revenue rulings, and regulations. Carol is a speaker on state and local tax issues and has been quoted in top media publications, including Forbes, NBC News, The Los Angeles Times, and USA Today.

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