State-wise cannabis tax rates generally range from about 9% to 37% at the state level, and most legal states stack a percentage excise tax on top of their ordinary sales tax. A handful of states instead tax THC potency, product weight, or wholesale cultivation. Rates change every legislative session, so the number that applies to a specific product always comes from the state revenue department.
How are cannabis taxes calculated?
Three models dominate. The retail percentage model charges a set excise rate on the sale price, the potency model charges per milligram of THC, and the weight model charges per ounce at the cultivation or wholesale level.
Cannabis Taxation Rates by State: How Each Market Taxes Weed and CBD
- Retail percentage: Washington at 37%, Montana at 20% for adult use, Oregon at 17%, Arizona at 16%.
- Stacked excise plus sales tax: California at 15% excise plus statewide and district sales tax, Colorado at 15% special retail sales tax plus a 15% wholesale excise.
- Potency based: New York applies a wholesale excise tied to THC content, and Connecticut adds a THC-based charge plus 3% at retail.
- Weight based: Alaska charges a flat per-ounce cultivation tax rather than a percentage.
Which states have the highest cannabis tax rates?
Washington holds the top spot with a 37% excise tax applied at the register, and cannabis there is exempt from the state sales tax. Montana, Oregon, and Arizona follow in the high teens to 20% range. Illinois uses a tiered system that reaches 25% on cannabis-infused products, on top of 6.25% sales tax.
Do local governments add their own cannabis taxes?
Yes, and in some states the local layer is significant. California allows city and county cannabis business taxes that often exceed the state excise rate, and Illinois, Massachusetts, and Oregon permit local add-ons of roughly 3%. That means two shops in the same state can charge different totals.
Cannabis Tax Rates in Different States: How to Compare Them
Are CBD products taxed like cannabis?
In most states, hemp-derived CBD that is not intoxicating is taxed as an ordinary retail good under standard sales tax rules, not under cannabis excise. However, several states now apply cannabis-style excise taxes to intoxicating hemp products such as delta-8 and THC beverages. Buyers should check the receipt breakdown to see which category a product falls into.
Why do state cannabis tax rates differ so much?
States balance revenue goals against concerns about black market competition and patient access. High excise rates raise money but can push buyers back to illegal sellers, while low rates protect the legal market at the cost of revenue. Medical cannabis is frequently taxed at a reduced rate or exempt entirely.
How do you verify the rate that applies to you?
Start with the state department of revenue or cannabis control authority, which publishes current excise, sales, and local schedules. Dispensary shelf prices usually already include excise tax, while sales tax may appear as a separate line. Medical patients should ask about exemption cards, since those can remove a large share of the total tax.