Md. lawmakers are considering options and learning that cannabis taxation varies from state to state

The Maryland House of Delegates’ Cannabis Referendum and Legalization Working Group is holding a briefing on November 15 to review how other states are taxing cannabis. screenshot.

Although Maryland voters overwhelmingly approved last week that adults ages 21 and older could use marijuana recreationally, state legislatures have yet to take action to make cannabis officially legal in July.

That’s why the House’s Cannabis Referendum and Legalization Working Group held a briefing Tuesday night to look at how other states are taxing cannabis.

It was the latest of several virtual meetings the panel has held to not only prepare for the regulation of legal cannabis, but also to ensure minority-owned companies can participate in the industry and to address civil and criminal penalties for offenders to change.

Beginning next summer, adults can own up to 1.5 ounces of marijuana and grow two plants outside of the public eye.

On Tuesday, lawmakers received information on taxation from Jackson Brainerd, a director of tax programs at the National Conference of State Legislatures (NCSL).

Before beginning his 25-minute presentation, he told lawmakers the organization took no position on whether states should approve the legalization of cannabis.

About 14 of the 18 states where recreational cannabis is legal levy a price-based tax.

Alaska, Maine and New Jersey tax cannabis by weight.

Brainerd said an edible product would be taxed by the weight used in its manufacture. However, he said some financial experts believe a weight-based approach could be more resilient to industry volatility, as prices could fall as the cannabis market matures.

He also said that using this control structure can be more complex when it comes to implementing a new system for weighing the products and keeping records of the facility.

Connecticut, Illinois and New York, which also levy rate-based taxes, levy a power tax. It is similar to an alcohol tax based on their salary measured in alcohol by volume and proof.

“Taxing based on potency is probably the best way to ensure that the quality of the product is taken into account and could discourage the consumption of stronger products… and protect revenue should prices fall,” Brainerd said. “However, [it’s] probably more burdensome from a compliance and administrative perspective.”

He also summarized some states’ recreational cannabis tax rates, including:

  • Alaska: $50 an ounce for flowers and mature buds; $25 per ounce for immature or abnormal buds.
  • Colorado: 15% retail tax and 15% excise tax.
  • Vermont: 6% sales and use tax and an excise tax of 14% of the selling price.

Neighboring Virginia, which approved cannabis legalization last year, levies a 21% point-of-sale marijuana retail tax and a 5.3% sales and use tax.

Del. CT Wilson (D-Charles) asked how much it has cost some states to introduce a recreational cannabis regulatory system.

Brainerd said smaller states like Vermont and South Dakota spend nearly $1 million annually “to get things moving.”

He also warned that other revenue streams could decline if cannabis is legalized. For example, officials in New Jersey noted that less money has been collected for court costs since the sale of cannabis became legal in February 2021.

Wilson reiterated his support for legalization in Maryland.

“I am firmly convinced that if done correctly, it can actually involve costs for the foundation. If we try to save people from prison and from dying, [then] We want them to consume a safe product,” he said. “We’re not going to be able to tax this at a staggering rate like some of these other states have.”

Cannabis revenue in California and Colorado exceeded tobacco and alcohol revenue last year, according to the NCSL. The same thing happened in Washington state in fiscal 2021.

Del. David Moon (D-Montgomery) asked how many licenses each state that has legalized cannabis has issued.

Brainerd didn’t know right away, but admitted that “availability is somewhat related to overall earnings.”

Moon said Maryland has fewer than 100 medicinal cannabis dispensing licenses that are codified by law.

“That’s not a very large number in retail stores,” he said. “Our experience with cannabis dispensaries in Maryland is very limited.”

Maryland voters joined those in Missouri on Election Day to pass ballot cannabis initiatives and authorize adult recreational use for those 21 and older.

The Rhode Island General Assembly passed adult use legislation earlier this year that includes a 20 percent tax broken down as follows: 10 percent cannabis tax, 7 percent sales tax, and 3 percent community tax on sale is. However, voters in 31 cities and towns have allowed businesses to operate a cannabis business, and voters in six municipalities will not allow retail outlets to open.

Voters in three other states — Arkansas, North Dakota and South Dakota — rejected measures that would allow adult recreational use.

The House cannabis working group plans to hold two meetings next month, but exact dates and times have not yet been determined.