State and federal excise taxes are a critical element of the business environment for major “vice” industries in the United States, such as tobacco. While no federal excise tax applies to marijuana, state excise taxes (“SET”) are a significant economic consideration for the recreational marijuana industry in a given state.
Like most SET on tobacco products (e.g., non-cigarette products like smokeless tobacco), marijuana SET tends to be an ad valorem tax imposed on certain business licensees for their sales of marijuana. However, there are important distinctions among the SET regimes in today’s key legal recreational marijuana markets.
Retail-level SET pervades the country’s largest legal marijuana markets. Out of the nine states with recreational markets that are projected, opens new tab to exceed $1 billion in total 2024 sales (recreational + medical), seven impose marijuana SET on retail sales only. Conversely, only two of these billion-dollar market states impose SET on sales by both cultivators and retailers.
H/T: www.reuters.com
