Cannabis excise and potency taxes by state

How do states tax cannabis?

States use four designs, often stacked:

1. Retail excise, as a percentage of price. The most common. Collected by the retailer from the customer.
2. Wholesale or cultivation tax. A percentage of the first sale or transfer from a grower or processor, or a fixed amount per ounce or pound.
3. Potency tax. A rate that varies with THC content or a fixed amount per milligram of THC.
4. General sales tax and local cannabis taxes on top of the above.

These are separate from income tax. Federal section 280E and state 280E decoupling concern income tax; excise taxes are owed whether or not the business makes a profit.

State cannabis excise rates in 2026

Rates are state-level adult-use rates as of September 2026 unless noted. General sales tax and local cannabis taxes are extra. Rates change often; confirm with the linked revenue department before relying on any figure.

State	Retail excise	Wholesale, cultivation or potency tax	Source and notes
California	15% of gross receipts	None since the cultivation tax ended	CDTFA: 19% from 1 Jul 2025, back to 15% on 1 Oct 2025 under AB 564, held until 30 Jun 2028
Washington	37%	None	RCW 69.50.535
Colorado	15% retail marijuana sales tax	15% excise on first transfer, on average market rate or contract price	Colorado DOR
Michigan	10%	24% wholesale excise from 1 Jan 2026	Michigan Treasury; 6% sales tax also applies
Illinois	10% at or below 35% THC; 25% above 35% THC; 20% infused products	7% cultivation privilege tax on first sale	Illinois DOR
New York	13% (9% state, 4% local)	9% on distributor sales to retailers, which replaced the per-milligram THC tax on 1 Jun 2024	Tax Foundation, Jan 2026
New Jersey	No state excise percentage; sales tax applies	Social Equity Excise Fee of $2.50 per ounce sold by cultivators, held flat for 2026	NJ Division of Taxation
Connecticut	Flat 10.75% from 1 Oct 2026	Until then, per milligram of total THC: $0.00625 plant material, $0.0275 edibles, $0.009 other	Connecticut DRS
Maryland	12% from 1 Jul 2025, up from 9%	None	Comptroller of Maryland
Minnesota	15% gross receipts tax from 1 Jul 2025, up from 10%	None	Minnesota DOR
New Mexico	14% from 1 Jul 2026 to 30 Jun 2027	None	NM Taxation and Revenue; scheduled annual increases
Massachusetts	10.75%	None	Tax Foundation, Jan 2026; 6.25% sales tax and up to 3% local option also apply
Oregon	17%	None	Tax Foundation, Jan 2026; localities may add up to 3%
Nevada	10%	15% of fair market value at wholesale	Tax Foundation, Jan 2026
Arizona	16%	None	Tax Foundation, Jan 2026
Montana	20%	None	Tax Foundation, Jan 2026
Ohio	10%	None	Tax Foundation, Jan 2026
Missouri	6%	None	Tax Foundation, Jan 2026; local taxes may apply

The Tax Foundation also reports that Maine lowered its per-pound cultivation taxes and raised its retail rate from 10% to 14% for 2026, and that Alaska taxes by weight at the cultivation level rather than by price.

Why potency and wholesale taxes matter more than the headline rate

Wholesale taxes hit producers directly. A retail excise is collected from the customer. A wholesale tax is a cost to the grower or processor, who may or may not be able to pass it on. Michigan’s 24% tax arrived in a market already known for falling wholesale prices, so a cultivation business there should be valued on results since 1 January 2026, not on 2025 margins. See selling in an oversupplied market.

Vertically integrated operators are taxed on a deemed price. Where there is no arm’s-length sale, the state supplies one. Colorado applies its 15% excise to an average market rate that the Department of Revenue publishes. If that rate sits above what the product would actually fetch, an integrated operator pays more tax per pound than an independent grower selling at the real price.

Potency bands shape product mix. In Illinois the step from 10% to 25% at 35% THC makes concentrates and vapes carry a much heavier tax than flower. A store’s blended excise rate, and its gross margin after tax, depend on what it sells. Connecticut’s shift to a flat rate on 1 October 2026 will change relative shelf prices there, so trailing sales mix may not predict the next twelve months.

What excise taxes mean in a sale

• Collected tax is not the seller’s money. Excise and sales tax collected from customers are held for the state. Buyers should reconcile tax returns to point-of-sale and track-and-trace sales, month by month.
• Arrears follow the deal. In an equity sale the liability stays inside the company. In an asset sale, state successor-liability rules can make the buyer answerable unless a tax clearance is obtained. The mechanics are in tax liabilities and holdbacks in a sale and selling with tax delinquency.
• Use the current rate in the numbers. A business that earned its trailing profit under a lower rate is worth less under the higher one unless prices moved. Illustrative: a retailer with $4,000,000 of sales that absorbs a 3-point increase loses about $120,000 of annual pre-tax profit; at a 4 times multiple that is $480,000 of value.
• Excise tax is not deductible relief from 280E. How an excise tax is treated on the federal return, as part of cost of goods sold, as a reduction of receipts, or as a disallowed expense, depends on who the tax is legally imposed on. Ask the target’s CPA how each tax was handled.
• Local taxes can exceed the state’s. City and county cannabis business taxes vary widely; check the relevant city page and the local approvals page.

This page is general education, not tax advice. Rates were checked in September 2026 and legislatures change them frequently.