Excise tax

An excise tax is a tax levied on a specific category of goods, typically imposed at the wholesale or retail transaction point. State cannabis excise taxes are structured in three principal ways: (1) ad valorem (percentage of price) — the most common approach, with rates ranging from 6% (Missouri) to 37% (Washington, the highest in the nation); (2) weight-based — Alaska levies $50/oz on flower; Maine imposes a supplemental cultivator weight tax; New Jersey's Social Equity Excise Fee is currently $1.52/oz; (3) potency-based (THC-tiered) — Illinois imposes 10% on flower ≤35% adjusted THC, 25% on flower >35% adjusted THC, and 20% on cannabis-infused products under the Cannabis Purchaser Excise Tax (410 ILCS 705/65-10); Connecticut taxes per milligram of THC (0.625¢/mg plant material; 2.75¢/mg edibles); New York imposes a distributor-level per-milligram THC tax. Excise taxes typically stack on top of general state and local sales taxes, producing effective retail rates from ~7% to over 40%. Cumulative state adult-use cannabis tax revenue surpassed $20 billion nationally by mid-2024 per MPP tracking. Federal excise taxes on cannabis do not yet exist, though MORE, CAOA, and STATES 2.0 each propose one. *→ See also: Social equity, → see also [Part 7]: 280E