Taxing medical marijuana sales is a growing trend

Blog Post

Medical marijuana has already been legalized in 23 states and the District of Columbia, according to As of the end of February, there were 14 additional states with pending legislation or ballot measures pertaining to the legalization of medical marijuana, including:

  • Florida
  • Georgia
  • Indiana
  • Iowa
  • Kansas
  • Mississippi
  • Missouri
  • Nebraska
  • Pennsylvania
  • South Carolina
  • Tennessee
  • Utah
  • West Virginia
  • Wisconsin

Taxing medical marijuana is less common. The Marijuana Policy Project explains that many patients believe that forcing sick people to pay taxes on medicine in general poses an undue hardship, especially because medicinal marijuana is not covered by insurance.

Even so, last month, California Senator Mike McGuire introduced S.B. 987, the Marijuana Value Tax Act (Act), a measure that would impose a 15 percent excise tax on medical marijuana sales. As of January 1, 2018, a purchaser would be liable for paying the tax to the seller. The bill would also require retailers to acquire a permit, prepare and file tax returns, and remit the taxes quarterly, while also establishing a Marijuana Value Tax Fund (Fund), into which the tax revenues would be deposited. Ultimately, the legislature would appropriate the Fund as follows:

  1. 30 percent to the Bureau of Medical Marijuana Regulation, for the administration of a grant program to distribute grants to local agencies that oversee the regulation of cultivating, processing, manufacturing, distributing, and selling of medical marijuana; 
  2. 20 percent to the Department of Parks and Recreation for base operations of state parks; 
  3. 10 percent to county and city human service departments for drug and alcohol treatment programs; and
  4. 10 percent to the California Natural Resources Agency for restoration and remediation of public and private lands and watersheds damaged by medical marijuana cultivation purposes.

The remaining 30 percent would go into California’s General Fund.

Senator McGuire’s press release asserts that the Act would likely bring in over $100 million in new revenue, based on sales estimates of over $1 billion statewide. Sales and the resulting tax revenues are expected to “soar” once new rules and regulations that Sen. McGuire authored last year as S.B. 643, the Medical Marijuana Regulation and Safety Act, kick in. According to the press release, S.B. 643 was one component of a “historic three-bill package covering every aspect of the commercial medical marijuana industry which will be regulated and subject to licensure.”

The Senator also notes that California is not alone in its quest: Colorado, Oregon, Washington and Alaska already impose taxes on medical marijuana.

Supporters of legalized marijuana, like, concede the difficulty of passing a tax increase. In order for the Act to become law, two-thirds of California’s Senate and Assembly must vote in its favor.

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