Recreational Marijuana Taxes by State, 2025

2025 Notable Changes

• New Jersey has increased the Social Equity Excise Fee on marijuana sales from $1.24 per ounce to $2.50 per ounce.
• The Virginia legislature passed a bill legalizing recreational sales and taxing them at 8 percent of retail sales and providing for a 2.5 percent local option tax, but the bill was vetoed by the Governor.

Nearly half of US states regulate and tax recreational marijuana markets, and all but 11 states have allowed medical marijuana. A few states have decriminalized possession but have not allowed cultivation or sale of marijuana, sometimes due to vetoes or court rulings blocking legalization. Many states that have not yet legalized marijuana seem to be moving toward legalization, but challenges clearly remain. Efforts to reform federal policy have been unsuccessful thus far, but new attempts have experienced increased support.

Several states, often those facing budget shortfalls, are considering increases to marijuana excise tax rates, while other states are considering decreasing their marijuana tax rates. Gubernatorial budget proposals in Maine, Maryland, Michigan, New Jersey, and Ohio included significant increases to marijuana taxes, and the Oregon legislature is considering increasing the cap on local taxes. Elsewhere, Alaska SB 73 would decrease the state’s tax from $50 per ounce to $12 per ounce, Nevada AB 307 would abolish the 15 percent wholesale tax while raising the retail tax from 10 percent to 14.25 percent, and California and New Mexico legislatures are considering abolishing the scheduled statutory increases to their marijuana taxes.

In several states, like Virginia and New Hampshire, enough support in the legislature exists to pass legalization bills but not enough to overcome gubernatorial vetoes. In other states, like Pennsylvania and Wisconsin, supportive governors have requested legalization bills from the legislature, but legislatures have declined to act. States like South Dakota and Florida have had majorities of voters support legalization ballot initiatives, but state courts or constitutional supermajority requirements have prevented those efforts to date.

Some states that have already legalized marijuana, like Ohio and Montana, have had their legislatures and/or governors attempt to recriminalize marijuana, in some cases after the adoption of voter approved ballot initiatives. In Texas, several municipalities have skirted federal and state prohibitions to legalize marijuana with voter initiatives, but Texas SB 1870 is under consideration in the state legislature to ban municipalities from legalization through those means—even in home rule jurisdictions. Idaho’s legislature recently passed HJR 4, which puts a constitutional amendment up for consideration of the voters in 2026 that would prohibit voter initiatives from legalizing marijuana or other drugs.

At the federal level, recent discussions of formally rescheduling marijuana from Schedule I to Schedule III may have tax implications and would make it easier for prohibition states to legalize marijuana. Other proposed reforms like the STATES 2.0 Act would defederalize marijuana policy entirely, removing cannabis from the Controlled Substances Act and allowing for interstate commerce between states that have legalized marijuana within their jurisdictions.

Under the existing federal prohibition, businesses that operate in states that disregard federal policy to establish “legal” markets remain burdened by the inability to participate in interstate commerce. These businesses also have difficulty doing business with banking institutions and face struggles associated with the unique legal framework.

Even as some states legalize sales, a significant majority of marijuana consumption occurs via illicit markets. States that impose excessive taxes, require expensive or limited licensure, or otherwise hinder their legal markets may not experience significant reductions in illicit consumption. If prices in legal markets are kept higher than illicit market prices, consumers will not be incentivized to switch to safer legal products. Taxes on legalized marijuana should not be so burdensome as to preclude legal markets from effectively competing with illicit markets. Properly designed taxes have the potential to generate billions of dollars in revenue for the states, though it may take some time for these revenues to be realized as legal markets are developed.

With interstate commerce prohibited, the disparate tax designs across states do not yet create some of the problems that occur in other legal markets. There are no multistate businesses that must comply with varied regulations, and tax arbitrage or double taxationDouble taxation is when taxes are paid twice on the same dollar of income, regardless of whether that’s corporate or individual income. cannot legally occur. However, if interstate commerce is eventually tolerated by the federal government, the significant differences in tax designs may create negative effects and opportunities for tax avoidance. States should prepare to harmonize their tax designs once interstate marijuana business is allowed­—and would be better advised to coalesce around best practices now, before systems become more difficult to reform.