Open a cannabis business? These states have the lowest taxes on recreational cannabis

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The cannabis industry has gone from flourishing to booming in recent years. Recreational cannabis sales are legal in 18 states (and Washington, DC) so far, and in 2020 Americans spent over $ 18 billion on legal weed – a 71% increase from the previous year.

But if you’re considering jumping on the green bandwagon, keep in mind that cannabis isn’t like other industries (at least, not yet). Because cannabis is not legal at the federal level, the regulations for selling it vary greatly from state to state. So, if you’re a canna business owner wondering where to put roots, it’s important to consider the regulations in every state where weed is legal.

One thing to consider is taxes. The sales taxes on marijuana were a big motivator for states to legalize it (especially as the economy recovers from COVID-19), and each state taxes the product differently based on its goals.

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According to a report released earlier this year by the Chamber of Commerce, a digital small business resource, Michigan is the two states with a sales tax of 10% and no additional taxes, and Massachusetts is the two states with a sales tax of 10.75% and none additional taxes.

Olivia Thomson, a spokeswoman for the Chamber of Commerce, told GreenState that the simple structure of cannabis taxation in these states can also help cannabis companies thrive.

“Because of their easy-to-understand tax structure and, in some cases, the higher cost to the consumer in these states, you can end up making more profit per sale in Massachusetts and Michigan. Of course, other factors play a role in owning a business, such as market saturation and local demand, but these states are the easiest in terms of tax costs and structure. “

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According to the Chamber of Commerce, the states with the highest taxes on cannabis are Washington with 35% sales tax, California with 15% sales tax and additional weight-based taxes on cannabis products ($ 9.65 / ounce for flowers, $ 2.87 / ounce). . for growing leaves and USD 1.35 / oz for cannabis plants), Colorado with a sales tax of 15% and an excise tax of 15% (i.e. an additional tax specific to cannabis products) and Nevada with a sales tax of 10% and an excise tax of 15%.

There is clearly a wide range of opinions on how states should tax cannabis. But this is where it gets more complicated: Thomson said that in some states, high taxes on cannabis don’t necessarily mean the state isn’t good for pharmacies and other cannabis companies. On the contrary, some states, like Colorado, are using tax dollars to help the government better support the industry.

“While states like California have extensive and increasingly difficult bureaucratic barriers to entry, Colorado has actively accepted and expanded its cannabis market despite its relatively higher taxes,” said Thomson. “Given Colorado’s long history of cannabis businesses, despite their relatively higher taxes, it appears to be one of the most supportive states in the United States for starting a cannabis business.”

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As an example, Thomson pointed out that just weeks ago Colorado set up a government office called the Cannabis Business Office (CBO), which aims to “create new economic development opportunities, local jobs and community growth for the diverse population of Colorado.” . “The higher taxes on cannabis in Colorado are pouring into a marijuana tax cash fund to support initiatives like this one.

“Expense taxes are important, but they shouldn’t be the main deciding factor when deciding whether to start your business,” said Thomson. “As mentioned earlier, industry-expanding initiatives like the CBO are possible because of the slightly higher taxes in Colorado. Nevertheless, certain states charge too high a price without justification. “

Elissa Esher is Assistant Editor at GreenState. Her work has also appeared in The Boston Guardian, Brooklyn Paper, Religion Unplugged, and Iridescent Women. Send inquiries and tips to elli.esher@hearst.com.

This article first appeared on GreenState, a cannabis lifestyle blog owned by Hearst.