Cannabis Tax Revenue Tops $8.7 Billion, But Data Gaps Persist

California Leads with Over $2 Billion
in Cannabis Taxes Collected

Listen: Cannabis Tax

Summary

• States have collected more than $8.7 billion in cannabis tax revenue since mid-2021, with California leading the pack at over $2 billion
• However, incomplete data submissions mean the total amount could be higher.
  

Newly released federal data indicates that states have collected over $8.7 billion in cannabis tax revenue since the U.S. Census Bureau began its tracking in mid-2021. While these figures might seem substantial, they likely underrepresent the actual amount due to incomplete data submissions from some states.

Leading the way, California has amassed more than $2 billion in cannabis tax revenue, followed by Washington State with $1.3 billion, Colorado with $898 million, and Michigan with $698 million. However, the latest update from the Census Bureau, which includes data up to the second quarter of 2024, does not fully account for all states. Specifically, Washington, Nevada, Maryland, New Mexico, New Jersey, and Arkansas have yet to submit their most recent quarterly figures. Therefore, the reported $8.7 billion in total taxes is likely an underestimate.

Among the states that did report for the latest quarter, California again topped the list with $156 million in cannabis taxes, trailed by Michigan at $75 million, Illinois at $72 million, Colorado at $61 million, Massachusetts at $50 million, and Arizona at $45 million. Conversely, states where only medical marijuana is legal reported much lower revenues, such as Louisiana with $298,000, Mississippi with $363,000, and Washington, D.C. with $391,000.

The Census tracker, an “experimental data product” since its introduction last year, also provides insights into how cannabis taxes contribute to each state’s overall tax revenue. For the most recent quarter, Alaska led with cannabis taxes comprising 1.27% of its total tax revenue, followed by Colorado with 1.21%, Oregon with 0.89%, Montana with 0.78%, and Michigan with 0.76%. While cannabis tax revenue is a small fraction of overall state tax revenues, it signifies a significant contribution from a single agricultural product.

In terms of changes since the previous quarter, New York saw the most considerable increase, with a 40.68% jump in cannabis tax revenue, as the state continues to expand its market by opening more dispensaries. Meanwhile, other states like Massachusetts, Alaska, and Connecticut also experienced revenue growth.

However, some states saw declines from the previous quarter, notably Rhode Island with a 24.80% reduction, Washington, D.C. with a 23.63% decrease, Missouri with a 10.23% dip, and Michigan with a 3.75% drop. It’s important to note that the Census data does not reflect real-time market conditions, as it is based on sales made during the prior quarter.

Despite the incomplete reporting, the Census Bureau’s efforts highlight the federal government’s increasing recognition of the cannabis industry’s economic impact. With states like Connecticut, Maine, Maryland, Michigan, Missouri, and New York reporting record-setting sales, the significance of the cannabis sector’s contributions to state revenues continues to grow.

Furthermore, industry data from Headset reveals that American consumers spent over $4.1 billion on pre-rolled joints over the past year and a half, accounting for about 15.9% of the cannabis market. This underscores the growing demand within the sector, as well as the public’s shifting perception, with most comments submitted to the DEA advocating for the descheduling of cannabis altogether.

Overall, the data reflects the substantial financial impact of the cannabis industry within the United States, as both a source of tax revenue and a driver of economic activity. For industry stakeholders, understanding these trends will be key to capitalizing on emerging market opportunities.

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