How states tax marijuana in 2025

There is disagreement on marijuana taxes across the U.S.

Nearly half of U.S. states tax and regulate recreational marijuana and only 11 states haven't permitted medical marijuana, but the way the drug is taxed can still vary considerably as of Jan. 2025, according to a report from nonprofit Tax Foundation.

"Possible federal legalization or descheduling of marijuana may encourage harmony between state systems," Tax Foundation said. "Efforts to reform federal policy have been unsuccessful thus far, but new attempts have experienced increased support."

President Donald Trump has said marijuana legalization should be a state issue, according to the Marijuana Policy Project. Under President Joe Biden, the federal government was ordered to undertake a review of marijuana's scheduling, a I to V scale referring to how acceptable the drug is, with I being the most unacceptable.

Marijuana is currently a schedule I drug, along with heroin and meth.

Taxes on retail sales was the most common way states raised revenue from marijuana, but some states also taxed by THC content or per the amount sold, such as by pounds or ounces.

For instance, California taxes 15% on gross retail receipts, while Colorado charges 15% on the wholesale average market rate, or $658 per pound of bud, along with a 15% tax on retail sales, Tax Foundation said.

The state taxes don't include counties that often charge their own taxes on marijuana.

Despite the arguably high taxes on marijuana in states that have legalized cannabis, many are struggling to bring in the revenue they hoped for after smokers have grown their own plants or resort to cheaper prices on the black market.

In California, the state’s total cannabis tax revenue for the fourth quarter of 2024 was down over 13% to $218.96 million compared to the previous quarter, and also fell more than $56 million year over year for the same three-month period, The North Bay Business Journal reports.

California is considering raising marijuana taxes by 4%, which the industry has said would be harmful.

“The cannabis industry is already in a challenging place due to high taxes. It’s hard to comprehend the impact to an industry already on life support,” said Eli Melrod, CEO of cannabis retailer Solful, to The North Bay Business Journal. “We should have an industry that works. I guarantee we’ll see a loss in revenue, and the illicit market is already booming.”