What State Has the Highest Cannabis Tax?
When it comes to cannabis taxes, California and Washington lead the nation with the highest combined tax rates, often exceeding 35% in some areas. If you’re a cannabis consumer or business owner, these states can significantly impact your wallet due to their layered tax structures.
California: A Complex Cannabis Tax System
California’s cannabis tax system includes multiple layers:
State excise tax: 15%
State sales tax: Ranges from 7.25% to 10.75% depending on the city or county
Local cannabis taxes: Can be as high as 15% in some municipalities
When you add everything up, cannabis products in some California cities are taxed at 35% or more. This makes legal cannabis more expensive and can even push consumers toward the illegal market where prices are lower.
Washington: A Flat but High Excise Tax
Washington takes a simpler approach but still hits consumers hard:
Excise tax: 37% on all retail cannabis sales
State sales tax: Around 6.5%
Local sales taxes: Usually 1–3%
That means the total tax burden in Washington can also exceed 40%, depending on local rates. Unlike California, Washington doesn’t allow local cannabis-specific taxes, but the high state excise tax more than makes up for it.
Why Are Cannabis Taxes So High?
States rely on cannabis taxes to fund:
Education and public health programs
Regulation and enforcement
Local government initiatives
While the revenue benefits are clear, high taxes can backfire by keeping illegal cannabis markets alive. In California, for instance, illegal sales still outpace legal ones in many regions because taxes make legal products unaffordable for many.
Final Thoughts
If you’re in California or Washington, expect to pay some of the highest cannabis taxes in the U.S. While these taxes help fund important programs, they also raise concerns about affordability and competition with illegal markets. As the cannabis industry continues to evolve, states may need to adjust their tax policies to strike a better balance.
In the case of navigating cannabis taxes in high-tax states like California or Washington, contact Dimov Associates today for professional assistance and strategic tax planning.
