What Did Colorado Do With Weed Money

Marijuana Tax Revenue: A State-by-State Breakdown

Marijuana can bring in big bucks for state governments.

Updated: Aug 3, 2021 at 3:58PM

On January 20, 2021, the Democratic party took control of both the United States Senate and the House of Representatives (though only with the vice president's tie-breaking vote in the Senate).

Democrats have generally shown more interest than Republicans in marijuana legalization, so many people are hopeful that we could see some movement on the issue during this Congress.

Discussions already happening around the SAFE Banking Act, the STATES Act, and the MORE Act could be a good sign for legalized banking, possession, and sale laws.

Will a more pro-marijuana Congress mean positive movement on marijuana stocks? That remains to be seen -- but one thing that could help move legalization forward is the ever-increasing amount of tax revenue generated by marijuana.

Some early legalizers have made over $1 billion in tax revenue from recreational cannabis already. As other states watch the cash roll in, they may be more motivated to open their state to legalized marijuana.

Here are the statistics on how much states make from marijuana taxes, how they tax cannabis, and what they use that money for.

Marijuana tax revenue by state in 2020

The table below shows the revenue collected in states with operational marijuana programs in 2020. Total tax collected varies depending on state population, how long the program has been established, and the method of taxation.

California, for example, represents the largest market for recreational marijuana, with approximately $3.1 billion of legal sales in 2019.

However, recreational marijuana was legalized more recently than in neighboring locales and in 2018 the illegal market still accounted for approximately 80% of recreational marijuana purchases.

As this distribution shifts over time, revenue collection is expected to increase.

State	2020 marijuana tax revenue
Alaska	$23,864,759
California	$1,031,879,926
Colorado	$387,480,110
Illinois	$52,783,471
Massachusetts	$81,734,083
Nevada	$105,180,947
Oregon	$133,150,349
Washington	$469,200,000

A number of states have legalized recreational marijuana but have a less-than-fully operational market. The Tax Foundation has estimated excise tax revenue for states with a market that has been operational for at least three years. Here's how much these states may stand to make once their markets are fully established:

State	Estimated annual marijuana excise tax revenue from fully operational market
Arizona	$183,169,705
District of Columbia	$26,605,996
Maine	$50,685,850
Michigan	$288,183,493
Montana	$35,142,502
New Jersey	$158,974,353
South Dakota	$14,270,281
Vermont	$27,313,974

Table source: Tax Foundation (2021).

Of course, these states aren't likely to see these numbers in excise tax revenue until at least three years after they establish a market. Seeing numbers in the. $2–10 million range is more likely in early years.

But these states are taking steps to bring in some of that revenue, even if they're moving slowly.

How much revenue are other states leaving on the table?

Using average excise tax figures and the number of marijuana-using residents in each state, the Tax Foundation estimated the potential excise tax revenue with a market established for at least three years.

Here's what they found:

State	Potential Revenue
Alabama	$92,217,856
Arkansas	$59,314,764
Connecticut	$97,696,550
Delaware	$24,566,974
Florida	$448,740,070
Georgia	$198,400,771
Hawaii	$28,453,985
Idaho	$33,295,445
Indiana	$157,009,061
Iowa	$50,183,462
Kansas	$42,058,743
Kentucky	$83,008,154
Louisiana	$81,616,779
Maryland	$135,837,117
Minnesota	$122,072,389
Mississippi	$47,304,242
Missouri	$119,222,374
Nebraska	$35,975,930
New Hampshire	$44,163,575
New Mexico	$61,692,434
New York*	$431,141,823
North Carolina	$182,947,622
North Dakota	$13,231,599
Ohio	$220,827,478
Oklahoma	$67,680,000
Pennsylvania	$244,553,615
Rhode Island	$35,455,500
South Carolina	$96,680,914
Tennessee	$132,509,552
Texas	$397,424,206
Utah	$44,428,908
Virginia	$139,977,848
West Virginia	$38,327,540
Wisconsin	$117,791,078
Wyoming	$10,054,045

Table source: Tax Foundation (2021). *Note: A recent statement from New York Governor Andrew Cuomo states that New York projects up to $350 million in annual tax revenue. Because of differences in the methods of calculations, large discrepancies may show up between projections from different sources. We've opted to keep the Tax Foundation data here to stay consistent with other figures in the table.

Total tax collections by state

Colorado and Washington were leaders in the recreational marijuana movement, acting as early as 2012 to move toward legalization. As a result, it comes as no surprise that they've generated more revenue from marijuana taxes than other states, some of which have had an operational market for two years or less.

Still, the tables below show the tremendous potential for states to generate significant revenue over time. In fact, the Tax Foundation estimates the market for legal marijuana could be worth as much as $30 billion by 2023.

With states facing budget shortfalls resulting from COVID-19, revenue from recreational marijuana could be a much-needed lifeline in locations that pursue legalization or facilitate the expansion of current markets.

State	First year of tax collection	Total revenue collected (as of end of 2020)
Alaska	2017	$55,184,464
California	2018	$2,067,681,715
Colorado	2014	$1,595,446,952
Illinois	2020	$52,783,471
Massachusetts	2019	$103,792,627
Nevada	2018	$274,125,703
Oregon	2016	$408,365,906
Washington	2015	$1,810,010,000

Now let's take a look at how cannabis tax revenue has grown over the years for each state -- as well as how those states are using that money.

Alaska's marijuana tax revenue

Year	Alaska state marijuana tax revenue
2017	$1,749,497
2018	$10,801,357
2019	$19,082,542
2020	$24,213,296

How does Alaska tax marijuana?

Alaska taxes cultivators per ounce and type: $50 per ounce for mature flowers, $25 per ounce for immature flowers, and $1 for each clone.

How does Alaska spend marijuana tax revenue?

25% to the general fund.
50% to the Department of Public Safety, Health and Social Services, and Department of Corrections.
25% to the Marijuana Education Fund.

California's marijuana tax revenue

Year	California state marijuana tax revenue
2018	$397,720,611
2019	$638,081,178
2020	$1,031,879,926

How does California tax marijuana?

California taxes are as follows: $9.65 per ounce for flower, $2.87 per ounce for leaves, and $1.35 per ounce for fresh plant.

How does California spend marijuana tax revenue?

First, the revenue covers regulatory and research costs.
Then, 60% goes to anti-drug programs targeting kids;
20% goes to environmental programs; and
20% goes to public safety.

Colorado's marijuana tax revenue

Year	Colorado state marijuana tax revenue
2014	$67,594,323
2015	$130,411,173
2016	$193,604,810
2017	$247,368,473
2018	$266,529,637
2019	$302,458,426
2020	$387,480,110

How does Colorado tax marijuana?

Colorado has a 15% wholesale excise tax on marijuana as well as a 15% retail excise tax. Recreational marijuana is exempted from general sales tax.

How does Colorado spend marijuana tax revenue?

10% goes to local governments.
90% goes to the state government.
- 15.56% of the state revenue goes to the general fund.
- 12.59% goes to the state public school fund.
- 71.85% goes to the marijuana tax cash fund.

The cannabis tax revenue from the wholesale tax goes to the Building Excellent Schools Today (BEST) fund. The first $40 million is earmarked for constructing new schools.

Illinois's marijuana tax revenue

Year	Illinois's marijuana tax revenue
2020	$52,783,471

How does Illinois tax marijuana?

Illinois charges 7% of cannabis products' value in wholesale taxes. It also levies the following retail taxes:

10% of value for cannabis products with 35% THC or less,
25% of value for cannabis products with more than 35% THC, and
20% of value for infused cannabis products that can't be smoked.

General sales tax also applies.

How does Illinois spend marijuana tax revenue?

35% to the general fund.
25% to the Illinois Recover, Reinvest and Renew Program.
20% to mental health and substance abuse.
10% to pay state bills.
8% to local government.
2% to public education.

Maine's marijuana tax revenue

Maine has no operational cannabis market at the beginning of 2021, but it's estimated that taxes will raise $10.7 million after the first full year of operation.

How will Maine tax marijuana?

Here's how Maine will tax marijuana cultivators in the fully operational market:

$335 per pound of flower.
$94 per pound of trim.
$1.50 per seedling or immature plant.
$0.30 per seed.

Consumers will also pay a 10% sales tax.

How will Maine spend marijuana tax revenue?

12% to Adult Use Marijuana Public Health and Safety Fund.
88% to the general fund.

Massachusetts's marijuana tax revenue

Year	Massachusetts state marijuana tax revenue
2019	$22,058,544
2020	$81,734,083

How does Massachusetts tax marijuana?

In Massachusetts, retail cannabis customers pay a retail excise tax of 10% plus a general sales tax of 6.25%.

How does Massachusetts spend marijuana tax revenue?

Sales tax revenue goes to the general fund, the Massachusetts Bay Transportation Authority, and the School Building Authority.

The excise tax support programs like the Alcoholism Administration and the Cannabis Control Commission.

Michigan's marijuana tax revenue

Michigan legalized recreational marijuana in 2018 and its first dispensaries opened in December 2019.

A ballot proposal to Michigan's legislature estimates the tax revenue for the first fiscal year (2020–2021) could total over $130 million when accounting for both excise and sales tax. By the time the market is fully established in 2022, the proposal estimates an excise tax revenue of $125 million.

How does Michigan tax marijuana?

Consumers currently pay a 10% excise tax and 6% sales tax.

How will Michigan spend marijuana tax revenue?

In the first two years of legalization, $20 million in revenue will go to medical marijuana research. The rest will be split between cities, townships, villages, counties, the state's School Aid Fund, and the Michigan Transportation Fund.

Nevada's marijuana tax revenue

Year	Nevada state marijuana tax revenue
2018	$69,759,783
2019	$99,184,973
2020	$105,180,947

How does Nevada tax marijuana?

Nevada taxes weed at the retail (10% of purchase) and wholesale (15% of fair market value) levels.

How does Nevada spend marijuana tax revenue?

Income from the retail tax goes to the state's rainy day fund. Revenue from the wholesale tax goes to cover expenses and boost the rainy fund as well.

Oregon's marijuana tax revenue

Year	Oregon state marijuana tax revenue
2016	$20,652,983
2017	$70,263,897
2018	$82,203,729
2019	$102,094,948
2020	$133,150,349

How does Oregon tax marijuana?

Oregon retailers charge a 17% state retail tax on marijuana products.

How does Oregon spend marijuana tax revenue?

40% to the state school fund.
20% to mental health, alcoholism, and drug services.
15% to the Oregon state police.
5% to the Oregon Health Authority for drug treatment and prevention.
20% to cities and counties.

Vermont's marijuana tax revenue

Vermont legalized recreational marijuana in 2018, though taxes have only more recently been passed. The Vermont market should be fully functional by 2022.

How does Vermont tax marijuana?

The state of Vermont imposes a 14% excise tax on marijuana at the point of sale. There's also a 6% general sales tax.

A research report published by the RAND Corporation suggests that aggressive taxation could produce between $20 and $75 million in annual revenue for the state.

How will Vermont spend marijuana tax revenue?

Bill S.54 states that "revenue from the sales and use tax imposed . . . on retail sales of cannabis or cannabis products in this State shall be used to fund a grant program to start or expand afterschool and summer learning programs, with a focus on increasing access in underserved areas of the State."

Washington's marijuana tax revenue

Year	Washington state marijuana tax revenue
2015	$64,630,000
2016	$186,000,000
2017	$315,200,000
2018	$362,000,000
2019	$390,400,000
2020	$469,200,000

How does Washington tax marijuana?

Washington charges a 37% retail tax on marijuana.

How does Washington spend marijuana tax revenue?

It goes to a variety of places. Here are a few of the places that money went in 2020:

The state health authority for a healthy youth survey.
The University of Washington for marijuana-related educational programs.
The state's health professions account.
Various state departments for research related to pesticides, licensing, accreditation, and testing.

The status of marijuana legalization around the United States

All of this tax revenue may play a part in legalization discussions. But some states haven't been swayed. Here are the states where cannabis is legal, illegal, criminalized, or somewhere in the middle:

State	Marijuana legalization status
Alabama*	Illegal
Alaska	Recreational legalized
Arizona	Recreational legalized
Arkansas*	Medical only
California	Recreational legalized
Colorado	Recreational legalized
Connecticut	Medical only
Delaware	Medical only
District of Columbia***	Recreational legalized
Florida*	Medical only
Georgia	Medical CBD oil only
Hawaii	Medical only
Idaho*	Illegal
Illinois	Recreational legalized
Indiana*	Medical CBD oil only
Iowa*	Medical CBD oil only
Kansas*	Illegal
Kentucky*	Medical CBD oil only
Louisiana*	Medical only
Maine	Recreational legalized
Maryland	Medical only
Massachusetts	Recreational legalized
Michigan	Recreational legalized
Minnesota	Medical only
Mississippi	Medical only
Missouri	Medical only
Montana**	Recreational legalized
Nebraska	Illegal
Nevada	Recreational legalized
New Hampshire	Medical only
New Jersey**	Recreational legalized
New Mexico	Medical only
New York	Medical only (legalization legislation being developed in early 2021)
North Carolina	Illegal
North Dakota	Medical only
Ohio	Medical only
Oklahoma*	Medical only
Oregon	Recreational legalized
Pennsylvania*	Medical only
Rhode Island	Medical only
South Carolina*	Illegal
South Dakota**	Recreational legalized
Tennessee*	Illegal
Texas*	Medical CBD oil only
Utah*	Medical only
Vermont	Recreational legalized
Virginia	Medical CBD oil only
Washington	Recreational legalized
West Virginia*	Medical only
Wisconsin*	Medical CBD oil only
Wyoming*	Illegal

* Criminal prosecution is still possible in these states.
** These states recently legalized recreational marijuana and may not yet have a functional market.
*** Possession, growth, and use of marijuana is legal in D.C. are legal, but the sale of cannabis is not, so there is no tax data to present.

Sources

Alaska Department of Revenue (2020). "Marijuana Tax Annual Report Data."
California Department of Tax and Fee Administration (2020). "Cannabis Tax Revenues."
Colorado Department of Revenue (2021). "Marijuana Tax Reports."
General Assembly of the State of Vermont (2020). "No. 164. An act regulating to the regulation of Cannabis."
Government of the District of Columbia, Office of the Chief Financial Officer (2020). "February 2021 Revenue Estimate."
Legislative Council Staff (2019). "Memorandum: Marijuana Tax Revenue in the State Budget."
Illinois Revenue (2021). "Annual Reports."
Massachusetts CTHRU (2021). "Total Tax Revenue Collections."
New York State Governor's Office (2021). "Governor Cuomo and Legislative Leaders Announce Agreement to Legalize Adult-Use Cannabis."
Oregon Department of Revenue (2021). "Oregon Marijuana Tax Statistics: Accounting Information."
Oregon Department of Revenue (2021). "Oregon Marijuana Tax: Distribution Information."
State of Nevada Department of Taxation (2021). "Marijuana Statistics and Reports."
Tax Foundation (2021). "Several States Considering Legal Recreational Marijuana."
Washington State Liquor and Cannabis Board (2020). "Annual Report."
Washington State Legislature (2020). "Dedicated marijuana account—Appropriations."

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