Will Marijuana Consumers Decide Cannabis is Too Expensive?

Many concerns surround the kickoff of recreational marijuana sales next year in California. People are concerned that the wildfires may have severely damaged the crops for next year. Others are worried the federal government will crackdown on the relaxed cannabis laws created by proposition 64 and about the illegal marijuana leaving the state. Now, people are concerned that marijuana may be overtaxed in California, still making black market marijuana more appealing.

Marijuana is a commodity, and like all commodities its prices will fluctuate depending upon supply and demand, and that happens in the illegal market as well. As more competition comes to the market, prices should be driven down. As long as taxes still make legal cannabis less expensive than illegal marijuana, don’t you think people will buy legal marijuana instead?

Anyone involved with the cannabis industry, or who wants to get involved in the cannabis industry, has an eye on the Golden State right now. California will begin selling licenses to grow and sell adult-use marijuana in January 2018.

It’s a huge market, obviously. One out of every eight Americans lives in California. Sales from marijuana are expected to reach more than $1 billion a year. Although the tax plan has drawn some criticism, the state plans on charging a 15 percent excise tax on recreational marijuana sales. Excise taxes are charged on purchases of a specific type of good.

But that’s not all. Local governments in cities and counties around the state also have set a tax on marijuana sales, ranging from 7.75 percent to 9.75 percent. So, depending on where you are in California, you could pay 25 percent just in taxes on each purchase.

You can also expect some costs to get passed on to you. The state is levying “cultivation fees” on wholesalers that amount to $9.25 per ounce of cannabis flower and $2.25 per ounce of leaves.

Related: How Will Businesses Handle Legalized Marijuana in the Workplace?

Rates in other states
Here are rates in other states where recreational marijuana is sold or will be sold in 2018. Keep in mind sales might also be subject to the state sales tax.

Colorado: A 15 percent excise tax, plus whatever is charged by local governments (in Denver, it’s 3.5 percent).

Nevada: A 15 percent tax on wholesalers, a 10 percent excise tax on consumers.

Oregon: A 17 percent sales tax, with local governments given the option to add an additional tax up to 3 percent.

Washington: A 37 percent excise tax on marijuana sales.

Maine: A 10 percent tax on marijuana sales

Massachusetts: A 28 percent tax on marijuana sales

As more states go public with plans to legalize marijuana, it’s important to keep these numbers in mind. Yes, it’s a great step forward for legal cannabis proponents and for cannabis entrepreneurs. But the fact it generates so much for government is certainly not hurting the marijuana legalization effort.


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Richard Lowe

Richard Lowe is a 14-year veteran of the financial sector with licenses as a commodity broker (Series 3) and investment advisor representative (IAR Series 65). Along with a focus on raising capital for the firms he was employed with, he also wrote and edited much of the content published by them. He holds a BA in Journalism from the University of Massachusetts. He has been a longtime advocate for marijuana legalization due to the social injustices associated with marijuana prohibition and the strong potential for the medicinal benefits of cannabis.

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