By Daniel Sabet · Cannabis CFO & Financial Advisor, GreenGrowth CPAs · 280E, Tax Strategy & Growth Planning · Los Angeles, CA | Rates last verified August 2026 | Cannabis Advisory
Cannabis tax rates move more than almost any other tax in the country. Nine states changed their tax position in the last twelve months. Michigan added an entirely new layer. Meanwhile California raised its excise and then reversed the increase. On top of that, the April 2026 rescheduling order changed the federal picture underneath all of it. So a rate table written eighteen months ago is not slightly out of date. It is wrong in nine places.
QUICK ANSWER
Cannabis tax rates stack in three layers. First a state excise tax, then state sales tax, and in many states a local cannabis tax on top. Washington carries the highest excise at 37%. However Michigan now runs the most complex structure, since a 24% wholesale excise was added January 1, 2026 on top of an existing 10% retail excise and 6% sales tax. Above all of that sits Section 280E, which denies ordinary business deductions for adult-use activity. Since April 2026, state-licensed medical cannabis sits outside 280E while adult-use remains inside it.
What Changed in Cannabis Tax Rates This Year
If you are working from a table of cannabis tax rates published before 2026, these entries are most likely wrong.
▶ Tax Position Changes in the Last Twelve Months
| State | Was | Now | Effective |
|---|---|---|---|
| Michigan | Retail excise of 10% | 10% retail plus a new 24% wholesale excise | Jan 1, 2026 |
| Minnesota | 10% gross receipts | 15% gross receipts | 2025 |
| Maryland | 9% retail | 12% retail | Jul 1, 2025 |
| California | 15%, raised to 19% | Back to 15% under AB 564 | Oct 1, 2025 |
| Missouri | 10% adult-use | 14% adult-use | Jan 1, 2026 |
| New Mexico | 12% excise | 13%, rising annually to 2030 | 2026 |
| Maine | Higher excise, lower sales tax | Excise down, sales tax up | Jan 1, 2026 |
| Kentucky | No legal market | Medical market operating | Sales from late 2025 |
| New York | Potency-based THC tax | 9% wholesale plus 13% retail | Jun 2024 |
Michigan is the outlier. No other state layers a wholesale excise of that size on top of an existing retail excise. Moreover it collides directly with the transfer pricing most vertically integrated operators use to manage 280E.
Federal Rescheduling Changed What Cannabis Tax Rates Actually Cost You
State cannabis tax rates are only half the picture. Since April 2026, the other half moved.
The rescheduling order moved state-licensed medical cannabis to Schedule III. Consequently ordinary business deductions returned for that activity, so Section 280E no longer applies to it. Adult-use cannabis remains in Schedule I and stays fully inside 280E.
So an operator holding both licence types now runs two federal tax regimes under one roof. Every shared cost has to be split between them. Furthermore the IRS has published no default method for doing it. Our guide to 280E expense allocation covers that split in detail.
💬 The Conversation Worth Having
Operators tend to treat the state rate as the number that matters, since it is the one printed on the receipt. In practice Section 280E costs most adult-use businesses far more, because it denies deductions rather than adding a percentage. A 10% state excise on a business already taxed on something close to gross profit is not the expensive part. So the table below is worth knowing, although the federal position underneath it is worth modelling.
Operating in a state that changed its rate this year? Your projections may be built on the old number.
Book a Review →Cannabis Tax Rates by State
These are adult-use cannabis tax rates unless otherwise noted. Local jurisdictions frequently add their own tax on top, so treat each figure as the state floor rather than your total burden.
State-by-State Rate Table
Arizona Through Massachusetts
| State | Excise Tax | Sales Tax | Notes |
|---|---|---|---|
| Arizona | 16% retail | 5.6% TPT | Municipal add-ons apply. Medical pays TPT plus local, without the 16% excise |
| California | 15% of retail gross receipts | 7.25% plus local | Raised to 19% then reverted to 15% under AB 564 from Oct 1, 2025. City cannabis taxes up to 10% on top |
| Colorado | 15% wholesale plus 15% retail | Exempt from general sales tax | Wholesale tax is based on the Average Market Rate, which the state resets periodically |
| Connecticut | Potency-based, per mg of THC | 6.35% | 3% municipal tax, while rates differ for plant material, other products and edibles |
| Delaware | 15% retail | No general sales tax | Currently among the lowest combined effective rates in the country |
| Florida | Medical only | Medical generally exempt | No adult-use market, although medical operators moved outside 280E after April 2026 |
| Illinois | 10% to 25%, tiered by THC | 6.25% | 20% on infused products, while municipal rates vary widely |
| Kentucky | No cannabis-specific excise tax | Confirm treatment with the Department of Revenue | Medical only under SB 47, effective Jan 1 2025. First sales late 2025, with dispensaries opening through 2026 |
| Maine | Reduced from Jan 1, 2026 | Increased from Jan 1, 2026 | LD 210 shifted the burden from excise toward sales tax |
| Maryland | 12% retail | Included in the 12% | Rose from 9% on Jul 1, 2025, with local rates up to 3% on top. Medical is fully exempt |
| Massachusetts | 10.75% retail | 6.25% | Local option up to 3%, so the combined rate can reach roughly 20% |
Michigan Through Washington
| State | Excise Tax | Sales Tax | Notes |
|---|---|---|---|
| Michigan | 24% wholesale plus 10% retail | 6% | The 24% wholesale excise began Jan 1, 2026 and does not apply to medical, although it is under legal challenge |
| Minnesota | 15% gross receipts | 6.875% | Rose from 10%, while medical stays exempt from both the gross receipts tax and state sales tax |
| Missouri | 14% adult-use | State and local apply | Rose from 10% on Jan 1, 2026, whereas medical stays at 4% |
| New Jersey | Social Equity Excise Fee per ounce | 6.625% | Local option up to 2%, so it sits among the lowest combined effective rates nationally |
| New Mexico | 13% retail | Gross receipts tax applies | Rose from 12%, with further annual increases scheduled through 2030, while medical stays exempt |
| New York | 9% wholesale plus 13% retail | Included in the 13% | The potency-based THC tax was repealed in June 2024, and the 13% now splits 9% state plus 4% local |
| Ohio | 10% retail | 5.75% plus local | Adult-use sales are live, and Senate Bill 56 changed revenue allocation from Mar 20, 2026 |
| Oregon | 17% retail | No general sales tax | Local option up to 3% |
| Virginia | Medical only | Applies to medical sales | No adult-use retail market operating yet |
| Washington | 37% retail | 6.5% plus local | The highest excise in the country, although a 2026 initiative to cut it to 7% failed to qualify |
A Note on Accuracy
Rates verified August 2026. Cannabis tax law changes frequently and often mid-year, so confirm against your state revenue department before relying on any figure for planning.
Why Section 280E Costs More Than Any State Cannabis Tax Rate
A state excise tax adds a percentage to a transaction. However Section 280E does something different and considerably worse, because it denies the deductions that would otherwise reduce taxable income at all.
What it disallows. Rent, utilities, marketing, and most salaries for adult-use activity. Cost of goods sold remains the only route to a deduction.
What that produces. Federal tax calculated on a base far larger than actual profit. Consequently effective rates in the industry run far above the statutory rate.
Where the lever is. Cost of goods sold allocation, applied consistently and documented at the time. Our guide to 280E audit defence sets out what that file should contain.
Three Things That Actually Reduce the Burden
1. Allocate cost of goods sold properly. Absorbing permitted indirect production costs is the single largest legitimate lever, and it needs a dated methodology memo behind it.
2. Separate medical from adult-use. Since April 2026 those carry different federal treatments, so blending them forfeits the benefit on the medical side entirely.
3. Reconcile your three systems monthly. Seed-to-sale, the point of sale and the ledger should agree. When they do not, no allocation method survives examination.
How GreenGrowth CPAs Works With Cannabis Tax Rates
We have worked with cannabis operators since 2016, across thirteen state markets. That matters here, because cannabis tax rates and the federal position interact. Optimising one can worsen the other.
Michigan is the clearest current example. Its 24% wholesale excise taxes exactly the internal transfer that vertically integrated operators price high to reduce federal 280E exposure. So the two strategies now pull in opposite directions. The transfer price that minimised your federal burden last year probably costs you money this year.
You can see the wider practice on our cannabis accounting page.
KEY TAKEAWAYS
- ›Nine states changed their cannabis tax position in the last twelve months, so any table published before 2026 is wrong in multiple places.
- ›Michigan added a 24% wholesale excise on January 1, 2026, on top of an existing 10% retail excise and 6% sales tax. No other state layers a wholesale tax of that size.
- ›California raised its excise to 19% and then reverted to 15% under AB 564 from October 1, 2025. Maryland rose to 12%, Minnesota to 15%, Missouri to 14%.
- ›Washington still carries the highest excise at 37%. A 2026 initiative to cut it to 7% failed to qualify for the ballot.
- ›Section 280E costs most adult-use operators more than any state rate, because it denies deductions rather than adding a percentage.
- ›Since April 2026 medical sits outside 280E while adult-use stays inside, so dual-licence operators run two federal regimes and must split every shared cost.
Cannabis Tax Rate Questions Answered
Rates and Rankings
Which state has the highest cannabis tax rate?+
Washington, at 37% excise plus state and local sales tax, which puts the combined burden near the mid-forties. A 2026 initiative to reduce it to 7% failed to gather enough valid signatures to reach the ballot. Michigan now runs the most complex structure rather than the highest headline rate, since its 24% wholesale excise stacks beneath a 10% retail excise and 6% sales tax.
Which states changed their cannabis tax rate recently?+
Nine in the last twelve months. Michigan added a 24% wholesale excise from January 1, 2026. Maryland rose from 9% to 12%, Minnesota from 10% to 15%, Missouri from 10% to 14%, and New Mexico from 12% to 13% with further annual increases scheduled. California raised its excise to 19% then reverted to 15% under AB 564. Maine shifted burden from excise to sales tax, New York replaced its potency tax with a 9% wholesale plus 13% retail structure, and Kentucky opened a medical market with sales beginning late 2025.
Is medical cannabis taxed differently from adult-use?+
In most states yes, and the gap is often large. Registered patients are commonly exempt from the adult-use excise and frequently from state sales tax too. Michigan's new 24% wholesale excise applies to adult-use only. Maryland exempts medical patients from the 12% rate entirely, and Minnesota exempts medical from both the gross receipts tax and state sales tax. Washington taxes both identically, although its medical exemption is scheduled to sunset in June 2029.
Federal Treatment
How does Section 280E affect the cannabis tax rate I actually pay?+
More than any state rate does, because it works differently. A state excise adds a percentage to a transaction, whereas Section 280E denies the deductions that would otherwise reduce taxable income. Rent, utilities, marketing and most salaries become non-deductible for adult-use activity, leaving cost of goods sold as the only route. The result is federal tax calculated on a base far larger than actual profit.
Did the April 2026 rescheduling change cannabis taxes?+
It changed the federal position rather than any state rate. State-licensed medical cannabis moved to Schedule III, so ordinary business deductions returned for that activity and Section 280E no longer applies to it. Adult-use remains in Schedule I and stays fully inside 280E. Consequently an operator holding both licence types now runs two federal tax regimes under one roof, and every shared cost has to be split between them.
Planning
How often do cannabis tax rates change?+
Constantly, and frequently mid-year rather than on January 1. Nine states changed in the last twelve months alone, driven mostly by budget pressure and by attempts to compete with illicit markets. California even raised and then reversed a rate inside a single year. So verify against your state revenue department before relying on any published figure for planning.
Can local governments add their own cannabis tax?+
Yes, in most states. California cities can add a cannabis business tax up to roughly 10%, Massachusetts allows a local option up to 3%, and Michigan, Illinois and several others permit municipal add-ons. Treat any state figure as the floor rather than your total burden, and confirm the rate for each jurisdiction you operate in.
Working With GreenGrowth CPAs
How does GreenGrowth CPAs help with cannabis tax rates?+
We model state rates and the federal position together, because optimising one can worsen the other. Michigan is the clearest current example, since its 24% wholesale excise taxes exactly the internal transfer that vertically integrated operators price high to reduce 280E exposure. GreenGrowth CPAs has worked with cannabis operators since 2016 across thirteen state markets.
The State Rate Is the Number You See. 280E Is the One That Costs You.
Book a cannabis tax review. We model the state rate and the federal position together, and tell you where the combined burden actually bottoms out.
Book Your Free Review →GreenGrowth CPAs · Cannabis Advisory Team
