In this country, no two state-run cannabis programs are alike.
As many state budgets take effect in early July, the previous month revealed a plethora of changes that will impact how marijuana is taxed.
California, which increased its tax from 15% to 19% in July, quickly reversed the approved measure, with the tax set to drop back to 15% in October. Although the state has been a hub for the cannabis industry, it has been marred by a lucrative and illegal market; unlicensed dispensaries thrive, while licensed ones struggle.
Bill Jones, the head of enforcement for California’s Department of Cannabis Control, told NPR in 2024 that “the black market is very pervasive and it’s definitely larger than the legal market.”
Experts suggest that high taxes, expensive startup costs, and strict regulations have fueled a thriving black market.
To play catch up, a cultivation tax was removed in 2022, along with a pause on increasing the 15% tax, which was scheduled to continue increase in 2025. The tax freeze ended in July, but California’s cannabis industry was swift with its opposition to the increase, and a measure to revert the 19% tax back to 15% was approved in early September.
Minnesota, on the other hand, which legalized cannabis in 2023, has seen a slow roll out in recreational dispensaries, in part due to delays in state licensing protocols. Though there are no state-licensed dispensaries open, Minnesota announced its 10% tax will be raised to 15% this year.
However, Minnesota’s cannabis laws recognize tribal sovereignty over cannabis regulations and sales. Adult-use sales finally started this year, with recreational dispensaries opening on the tribal lands of White Earth, Red Lake, Leech Band of Ojibwe, and the Prairie Island Indian Community. These tribes are not subject to state tax regulations and can impose their own taxes separate from the state.
And in Maine, recreational cannabis taxes have risen by 40%, increasing from 10% to 14% by January. Similar to California, Maine will cut its cultivation tax by a third. Unlike California, the tax hike occurs alongside a reduction in its cultivation tax, a move that will probably lead to higher prices overall.
The cannabis industry is always subject to change. Coupled with state budgets, regulations, and market maturity, the cannabis industry continues to shift.