Adult-use cannabis carries a 9 percent wholesale excise, paid by distributors on transfers to retailers, plus a 13 percent retail excise at point of sale made up of 9 percent state and 4 percent local. Adult-use is not subject to the regular sales tax. Medical cannabis is exempt from the adult-use excise and instead pays a 3.15 percent gross receipts excise, reduced from 7 percent. Registered Organizations and microbusinesses selling direct to consumers apply the 9 percent wholesale rate to 75 percent of the retail price. All cannabis excise filings go through the New York State Department of Taxation and Finance Web File portal.

New York repealed the THC potency-based tax effective June 1, 2024. That system charged by milligram of THC, at different rates for flower, concentrates, and edibles, and it was complex to administer and expensive to comply with. It was replaced with a 9 percent wholesale excise and a 13 percent retail excise. The change was estimated to cut the effective combined cannabis tax burden from roughly 38 percent to around 22 percent, with the aim of making the legal market more competitive against the unlicensed one. The medical excise dropped from 7 percent to 3.15 percent at the same time.

Registered Organizations and microbusinesses are vertically integrated, handling cultivation, processing, and retail under one licence. Because there is no separate wholesale transfer to price against, the 9 percent wholesale excise applies to 75 percent of the final retail price rather than an actual wholesale price. The 13 percent retail excise then applies on top, calculated on the full retail price. Getting the base wrong repeats the error on every transaction, which is one of the more common findings when we review a New York operator's filings.

Yes, and uniquely it happens twice. New York State decoupled for licensed cannabis operators effective for tax years beginning on or after January 1, 2023, under the 2022-2023 budget bill signed April 9, 2022. New York City decoupled its Unincorporated Business Tax, General Corporation Tax, and Business Corporation Tax separately under S7508, signed November 17, 2023, retroactive to tax years beginning January 1, 2022. A New York City operator can therefore deduct ordinary business expenses at both state and city level even where federal law disallows them for adult-use activity. No other state offers two layers.

Often, and the city layer is where the larger opportunity usually sits because it reaches back to tax year 2022. Returns prepared on federal 280E logic will have disallowed expenses that New York and New York City both allow. Whether amending makes sense depends on the amounts involved, the years still open under the statute of limitations, and how well the underlying records support the position. We start by quantifying what is recoverable before recommending anything, since an amended return that cannot be supported is worse than no amended return.

State-licensed medical cannabis moved from Schedule I to Schedule III in April 2026, lifting IRC 280E federally for qualifying medical operations. Adult-use cannabis remains Schedule I and fully subject to 280E. For a New York City medical operator, that produces deductibility on federal, state, and city returns at once. For an operator holding both medical and adult-use licences, it means running two federal tax regimes simultaneously, with every shared cost allocated between them. Treasury and the IRS have said further guidance is forthcoming, so positions should be documented on the basis they were taken.

The DEA held an expedited administrative hearing on broader rescheduling from June 29 to July 15, 2026. Participants filed post-hearing briefs, and the DEA's own final brief argued that cannabis should move to Schedule III. The administrative law judge has not issued a recommendation, no decision has been made, and no timeline has been set. Any resulting rule would also face likely legal challenge. Planning for the possibility is sensible; budgeting on the assumption is not. Adult-use cannabis in New York remains Schedule I today.

For a licensed operator, yes. New York layers three separate excise charges, a basis rule that applies only to vertically integrated operators, and two levels of 280E decoupling with different effective dates. A generalist CPA will rarely have met any of them, and typically will not build cost of goods sold allocation around 280E at all. The usual outcome is one of two things: overpaying federal tax through missed COGS opportunities, or leaving the state and city decoupling partly unclaimed.

We start with an onboarding review covering prior federal, state, and city returns, your excise filings, and how your chart of accounts handles the three positions. That surfaces both risk and missed opportunity before you commit to anything. Next we request records from your existing accountant and agree a handover date. Most transitions happen between filing periods, though we regularly pick up mid-year where a return is outstanding or an amended filing window is closing.