You picked out $50 worth of cannabis at a California dispensary. You handed over your card. The total came to $72. You looked at the receipt and saw four different tax line items and wondered if you had accidentally agreed to fund a highway project. You are not imagining it. Cannabis is one of the most heavily taxed consumer products in the United States and the tax structures are complicated on purpose.
Understanding why your dispensary receipt looks the way it does, and how your state compares to others, gives you a clearer picture of where your money actually goes and why the unlicensed market still exists despite full legalization in more than twenty states.
Quick Answer: What Are Cannabis Tax Rates by State?
Cannabis tax rates range from Maryland’s 9 percent to Washington’s 37 percent excise tax before any sales tax is added. Most legal states land between 15 and 25 percent total tax burden when excise taxes and sales taxes are combined. Local city and county taxes can add another 2 to 5 percent on top of state rates. California, Washington, and Illinois consistently rank among the highest-tax cannabis markets. Missouri and Maryland consistently rank among the lowest.
How Cannabis Taxes Work: The Three Layers
Excise Tax
This is the cannabis-specific tax applied either at the point of sale, at the wholesale transfer between cultivator and retailer, or based on the weight or THC content of the product. Most states use a retail excise tax, meaning you pay it as a percentage of the purchase price at the register. Washington applies a flat 37 percent excise at retail. California applies 15 percent excise. Missouri applies 6 percent.
State Sales Tax
Cannabis in most states is subject to the standard state sales tax in addition to the excise tax. California’s standard sales tax is 7.25 percent. Washington has no separate state sales tax on cannabis but its 37 percent excise makes up for that. Some states like Maryland exempt cannabis from the standard sales tax entirely, which is part of why Maryland’s total burden is among the lowest.
Local Tax
Cities and counties in most legal states can add their own cannabis tax on top of state taxes. In California, local cannabis taxes range from 0 in some cities to 15 percent in others. Denver adds 5.5 percent on top of Colorado’s state taxes. Chicago adds several percentage points on top of Illinois’s already tiered state rate. These local additions are why the same product can cost noticeably different amounts at dispensaries in different cities within the same state.
State by State Cannabis Tax Comparison 2026
Alaska: Unique Weight-Based Excise
Alaska applies a $50 per ounce excise tax on cannabis flower at the cultivation level, not as a percentage. Trim and immature plants are taxed at lower rates. Alaska has no state sales tax, which partially offsets the excise burden. The effective tax rate varies based on retail price but typically runs 15 to 20 percent of the final purchase price.
Arizona: 16 Percent Excise Plus Sales Tax
Arizona applies a 16 percent excise tax on recreational cannabis plus the standard transaction privilege tax of 5.6 percent. Local taxes add another 2 to 3 percent in most jurisdictions. Total burden in most Arizona markets runs 22 to 25 percent.
California: 15 Percent Excise Plus Local
California applies a 15 percent state excise tax. The standard California sales tax of 7.25 percent also applies. Local cannabis taxes vary widely from zero to 15 percent. In Los Angeles the total tax burden on cannabis regularly exceeds 30 percent and can reach 35 percent or higher in some neighborhoods. This tax burden is a primary reason California’s unlicensed market has been so persistent despite full legalization.
Colorado: 15 Percent Excise Plus Sales Tax
Colorado applies a 15 percent retail marijuana excise tax plus a 15 percent state sales tax on cannabis. Denver adds 5.5 percent local cannabis tax. Total burden in Denver runs around 30 percent. Colorado’s tax structure was one of the first recreational cannabis tax models and has been revised multiple times since 2014.
Connecticut: Tiered by THC Content
Connecticut’s excise tax is tiered: products with 35 percent THC or less are taxed at a lower rate, products above 35 percent are taxed at a higher rate. The standard state sales tax of 6.35 percent applies. Total burden typically runs 15 to 20 percent depending on the product type.
Illinois: Tiered by THC Content, Among the Highest
Illinois applies a tiered excise tax: 10 percent for cannabis with 35 percent THC or less, 20 percent for cannabis-infused products, and 25 percent for products above 35 percent THC. The standard state sales tax of 6.25 percent applies. Chicago’s local taxes push the total burden to 35 percent or higher on many products. Illinois regularly ranks among the most expensive cannabis markets in the country.
Maryland: 9 Percent, Among the Lowest
Maryland applies a 9 percent cannabis excise tax with no separate state sales tax on cannabis. Local jurisdictions cannot add cannabis-specific taxes. At 9 percent total, Maryland has one of the lowest cannabis tax burdens in the country. This was a deliberate policy choice to undercut the unlicensed market and has been effective at driving consumer adoption of licensed retail.
Massachusetts: 10.75 Percent Excise Plus Sales Tax
Massachusetts applies a 10.75 percent cannabis excise plus the standard state sales tax of 6.25 percent. Local municipalities can add up to 3 percent. Total burden runs 17 to 20 percent in most markets.
Michigan: 10 Percent Excise Plus Sales Tax
Michigan applies a 10 percent excise tax plus the standard 6 percent state sales tax. Local taxes can add up to 3 percent. Total burden around 16 percent makes Michigan one of the more affordable legal markets, combined with high competition among cultivators that has driven down product prices significantly.
Minnesota: 10 Percent Excise Plus Sales Tax
Minnesota applies a 10 percent cannabis excise tax plus the state sales tax of 6.875 percent. Local taxes may apply. Total burden runs around 17 to 20 percent.
Missouri: 6 Percent, the Lowest Flat Rate
Missouri applies a 6 percent cannabis excise tax plus the standard state sales tax of 4.225 percent. Local jurisdictions can add their own taxes. Total burden in most Missouri markets runs 10 to 14 percent, making it the lowest flat-rate tax structure among legal states and contributing to Missouri’s competitive retail prices.
Montana: 20 Percent Excise
Montana applies a 20 percent cannabis excise tax with no separate state sales tax on cannabis. Local jurisdictions can add up to 3 percent. At 20 percent for recreational users, Montana’s tax burden is moderate. Medical cannabis patients pay 4 percent, significantly lower than recreational rates.
Nevada: Layered Wholesale and Retail Excise
Nevada applies a 15 percent excise tax at the wholesale level plus a 10 percent retail excise tax. State and local sales taxes also apply. The layered structure means cannabis is taxed twice before you pay. Total burden in most Nevada markets runs 33 to 35 percent, making Las Vegas cannabis significantly more expensive than the pretax price suggests.
New Jersey: Social Equity Excise Fee Plus Sales Tax
New Jersey’s excise structure is unique. Rather than a flat percentage, it applies a Social Equity Excise Fee that scales based on the price per ounce of cannabis, plus the standard state sales tax of 6.625 percent. Local taxes can add up to 2 percent. Total burden typically runs 10 to 13 percent, among the lower rates on the East Coast.
New York: 9 Percent Excise Plus Sales Tax
New York applies a 9 percent cannabis excise tax plus the standard state sales tax of 4 percent plus applicable local taxes. New York City’s local taxes bring the total to around 13 to 14 percent in the five boroughs, which is moderate compared to California and Illinois.
Oregon: 17 Percent Excise, Low Retail Prices
Oregon applies a 17 percent state retail cannabis tax. Local jurisdictions can add up to 3 percent. No separate state sales tax. Total burden around 17 to 20 percent. Oregon’s retail prices are among the lowest in the country due to an oversupply of licensed cultivators, which means even with a reasonable tax rate the end price is competitive.
Washington: 37 Percent, the Highest
Washington applies a 37 percent cannabis excise tax with no separate state sales tax. This is the highest cannabis-specific tax rate in the country. The state’s logic when setting this rate in 2012 was to generate significant public revenue, which it has done, but the high rate has also sustained a meaningful unlicensed market in some parts of the state. Local sales taxes apply on top of the 37 percent excise, pushing total tax burdens in Seattle to 42 to 44 percent on some products.
Where Cannabis Tax Revenue Goes
Each state directs cannabis tax revenue to different programs. Colorado allocates a significant portion to the Public School Capital Construction Assistance Fund and youth cannabis education programs. California directs revenue to youth programs, environmental restoration, and public safety. Illinois allocates revenue to social equity reinvestment in communities disproportionately impacted by cannabis enforcement. Maryland directs revenue to the Cannabis Public Health Fund and to the Blueprint for Maryland’s Future education funding. Missouri’s revenue goes to veterans services and drug treatment programs.
How High Taxes Sustain the Unlicensed Market
The unlicensed cannabis market has not disappeared in any legal state. The primary reason is price. In high-tax states like California, Washington, and Illinois, the total tax burden adds 30 to 40 percent to the retail price. An unlicensed seller who pays no tax can undercut the licensed retailer significantly while selling a product that may be essentially identical. Until the tax burden comes down or enforcement of unlicensed operators increases substantially, this dynamic persists. Maryland’s deliberate choice to set a low 9 percent rate is partly an experiment in whether lower taxes can collapse the unlicensed market by making legal prices more competitive.
Frequently Asked Questions
Which state has the highest cannabis tax?
Washington state has the highest cannabis-specific excise tax at 37 percent. When local taxes are added the total burden in Seattle markets can reach 42 to 44 percent. Illinois’s tiered structure produces comparable or higher total burdens in Chicago for high-THC products.
Which state has the lowest cannabis tax?
Missouri at 6 percent excise has the lowest flat cannabis tax rate. Maryland at 9 percent with no local additions allowed is the lowest total burden in practice.
Why is cannabis taxed so much?
Cannabis taxes serve multiple policy goals simultaneously: generating public revenue, funding social equity and public health programs, compensating for enforcement costs, and in theory discouraging overconsumption. The rates set during early legalization were often higher than optimal because states were politically cautious about appearing to profit from cannabis too visibly.
Do medical cannabis patients pay lower taxes?
In most states yes. Montana charges medical patients 4 percent versus 20 percent for recreational users. Colorado charges medical patients the standard sales tax rate without the recreational excise. Many states exempt medical cannabis entirely from the excise tax.
Author: Paul Jernigan covers cannabis law, policy, and economics for Ganjly.
Related: Read Ganjly’s complete possession limits chart and our individual state guides for detailed tax breakdowns.
