Medical vs. Recreational Cannabis Taxes Explained

Currently, 24 states sell cannabis recreationally. If you are in one of these states, it’s understandable that you might feel tempted to forget about the medical card process. Even if you qualify as a patient, it’s an application process that does take some information and patience.

While recreational cannabis is available in many states, there are still some benefits to those who have a medical cannabis card and purchase from medical dispensaries instead of recreational weed options. For example, some states allow for higher possession limits for medicinal cannabis users.

Just like many other things that require purchase, cannabis is subject to state tax laws. You might see a difference in price between your purchase and someone making a similar purchase. This may get you wondering if medicinal and recreational weed taxes are the same.

In the United States, each state is responsible for handling taxes on goods that move within its jurisdiction, allowing states to decide their tax laws. Cannabis tax rates vary across the country.

What Are The Different Types Of Cannabis Taxes?

Cannabis is still deemed federally illegal, and there are no blanket rulings surrounding medical marijuana taxes. Still, state and local jurisdictions can tax the green plant at whatever level is considered fit.

Pro-weed lobbyists often highlight tax revenue as a key reason to support cannabis legalization and get it on the ballot.

Medical cannabis typically faces these three main types of taxes:

• Excise tax
• Sales tax
• Local tax

An excise tax is placed on goods like tobacco, beer, or cannabis. People sometimes call excise taxes “sin taxes” because they add an extra fee on top of local and sales taxes.. In most states, the excise tax is the consumer’s responsibility to fulfill.

A sales tax is standard to expect when you purchase almost anything, like a television, etc (unless you are a resident of Alaska, Montana, Delaware, Oregon, or New Hampshire) and is paid to states for services and retail goods. The sale of cannabis is no exception.

Counties or municipalities impose local taxes to fund specific programs. Alaska, California, Massachusetts, Oregon, New York, and Virginia allow localities to levy additional taxes on cannabis purchases.

Do I Pay Cannabis Tax Or Marijuana Tax?

Yes, but don’t let the wording confuse you—cannabis tax and marijuana tax mean the same thing. Both terms refer to an excise tax that’s added on top of standard sales and local taxes.

This tax applies when you buy cannabis products, and the exact amount you pay depends on your state’s laws. Most states apply different tax rates for recreational versus medical marijuana, with medical purchases often taxed at a lower rate, or sometimes not at all.

Always check your state’s specific cannabis tax rules to know what to expect at checkout.

What Are The Taxes Like For Recreational Use?

State, local, and excise tax rates for recreational cannabis will differ between each of the 24 states that currently offer adult-use sales of cannabis.

Visit the Tax Foundation to view recreational marijuana taxes by state. The tax structure will vary across states. Lawmakers could determine taxes based on weight, price, or THC content, among other factors.

With federal prohibition still in place, interstate commerce remains illegal, therefore leaving the taxing power to each state to decide on the best course of legal cannabis sales.

Frequently Asked Questions

How Is Cannabis Taxed In The US?

Cannabis taxes vary by state, as each state sets its own regulations. Since cannabis remains classified as a Schedule I drug, the federal government cannot impose taxes on it, giving states full control over how it’s taxed.

Legal cannabis sales in both medical and recreational stores will consist of an excise tax, a local tax, and a sales tax.

What Is The Downside Of Medicinal Cannabis?

If you are someone who only purchases cannabis once in a blue moon, medicinal cannabis may not be right for you.

On the other hand, if you are someone who uses cannabis regularly to create an elevated sense of well-being, you might want to explore getting a medical card in your state.

Possessing a medical marijuana card can give you access to higher potency products, dispensaries directly for medicinal consumers, and some recreational dispensaries may offer in-store discounts if you are a medical cardholder.

If you are a consistent cannabis buyer at your dispensary, a medical marijuana card will eventually begin to pay for itself with the funds being saved over time. Meeting with a specialized cannabis doctor could help lead you through the process of state approval.

How Much Revenue Do States Make From Marijuana Taxes?

According to the Marijuana Policy Project, the year 2023 generated more than $4 billion in taxes from recreational-use sales. 

Here is a state-by-state guide of tax revenue generated from adult-use cannabis sales in 2023.