Tax Benefits: Recreational vs Medical Marijuana
Updated: Jan 13, 2021
Since 2012, marijuana has been recreationally legalized in 15 states (and Washington DC), and 36 states have legalized the use of medical marijuana. While cannabis remains illegal under federal law, the push to legalize it continues.
This begs the question, are there any benefits to possessing a medical marijuana card in a state where recreational cannabis is legal? There are, in fact, many benefits that come from having a medical card in recreational states. For one, lower tax cost at dispensaries.
When purchasing legal cannabis, there are three different types of taxes that can come into play: excise, sales and local jurisdiction tax.
Whether you live in a state where marijuana is legalized recreationally, medically or both, you will still have to pay some form of taxes on your transaction. Sales tax on marijuana products is standard. Local jurisdiction taxes depend on the city or county, while some cities may also add a local tax to transactions in addition to the state excise tax.
Are Taxes Lower For Medical Marijuana Cardholders?
In recreational states, the most common form of tax is an excise tax which is usually a certain percentage of the retail price. The amount of excise tax varies from state to state. For example, in Nevada the excise tax is 10%, Colorado is subject to 15% and in Washington State, the excise tax is 37%.
However, states such as Maine and Washington offer some exemptions for specific taxes for individuals who have their medical marijuana cards. In Colorado, qualified medical patients do not have to pay the 15% excise tax. In California, there is an excise tax of 15%, sales tax (8-10%) and a cannabis business tax (5-15%). Yet, California medical card holders are exempt from the state sales tax.
Overall, with a medical marijuana card, this can be very cost-effective for patients to help save money and avoid any unnecessary fees.