News, Research

Medical vs. Recreational: Cannabis Taxes Explained

January 8, 2020 02:14 pm ET

The cost of cannabis is drastically different between medical and recreational use products. Medicinal cannabis products generally cost less than what you would find in the recreational use market. The reason for this is largely due to the taxes imposed. Regardless, if you reside in a state that has legalized cannabis at all, everyone must pay some sort of tax on the things they purchase in a regulated market. It’s the American way! But why is there such a steep difference between medical and recreational products when, in the end, they’re basically the same product? Let’s explore…

In the US, each state is responsible for how it levies taxes on goods that move within its jurisdictions. Cannabis is no different! The way states levy taxes is completely individual to each state. So, the tax rates will vary drastically across the country. 

Recreational Cannabis

In states where the recreational use of cannabis is legal, the biggest tax is an excise tax. It’s usually a percentage of the retail price. Some refer to this as a ‘sin’ tax because it’s for goods that are thought to be “socially harmful” or “unnecessary”. You’ll find excise taxes on alcohol, cigarettes, gambling, and pornography. Excise taxes are the seller’s responsibility but are often put on the consumer through higher purchase prices in an effort to “discourage” use. And these tax rates will vary depending upon which state you’re in. For example, Nevada imposes a 10% excise tax whereas Washington state is a whopping 37%. 

Some states and localities also impose more taxes on top of the excise tax such as a general sales tax. There can also be an additional cultivator tax that you will see in some states such as Nevada and Colorado. If you have a medical card, you will most often be exempt from a large portion of these taxes. Ultimately, it will be very cost-effective for you. However, do note that these steep taxes on recreational cannabis create revenue that the states can use to their advantage. The revenue is usually put toward funding state programs such as education, healthcare, crime, and economic development. 

Medical Cannabis 

Most states with a medical cannabis program impose some sort of sales tax on medical cannabis products. These particular tax rates are similar to the general state or local sales tax rates. They are all basically under 10%. This is why prices for medical cannabis is typically much lower than recreational products. But the return on revenue is not near as much as one would see coming from the recreational market. 

There are many benefits to being a medical cannabis patient in a state where recreational use is legal. Patients can potentially save hundreds if not thousands of dollars per year on cannabis purchases, gain exclusive dispensary access, and permitted more freedom among many other benefits. If you want to pursue cannabis therapy or want to become a medical patient, contact Veriheal. We’ll show you the way and help you begin your journey.

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Ty says:

great article!

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Christina says:

Thanks

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