Cannabis tax revenue by state ranges from a few million dollars a year in new markets to more than $1 billion in California. Washington and Colorado collect the most per resident, while California and Illinois collect the largest total amounts. Every state with legal adult-use sales charges an excise tax on cannabis on top of its normal sales tax, and most earmark the money for schools, treatment, or local governments.
How much cannabis tax revenue does each state collect?
The figures below are approximate and mix different state fiscal years, so treat them as a ranking rather than an exact comparison. Totals combine state excise tax and state sales tax on cannabis where both apply.
Cannabis Tax vs Alcohol Tax: Which Costs You More?
- California: more than $1 billion a year, the largest total in the country.
- Washington: roughly $500 million or more a year, and the highest revenue per resident.
- Illinois: about $500 million a year from a tiered excise tax plus sales tax.
- Michigan: about $300 million a year, driven by a 10% excise tax and 6% sales tax.
- Massachusetts: roughly $300 million a year from a 10.75% excise tax plus sales tax.
- Colorado: about $250 million to $300 million a year, with more than $2.5 billion collected since 2014.
- Arizona: about $250 million a year from a 16% excise tax.
- Oregon: about $150 million to $200 million a year.
- Nevada: about $150 million a year from wholesale and retail taxes.
- Missouri: more than $100 million in its first full year of adult-use sales.
What taxes do legal states charge on cannabis?
States rarely rely on a single tax. Most stack multiple charges that apply at different points in the supply chain, which is why two states with similar sales volume can report very different revenue.
- Retail excise tax: a percentage added at the register, such as Washington's 37% or Illinois' tiered rate of up to 25%.
- Wholesale tax: a percentage charged when cultivators or processors sell, used in states such as Nevada.
- Sales tax: standard state and local sales tax usually applies to cannabis purchases too.
- Weight or potency taxes: a few states, including Maine, tax flower by weight at the cultivation stage.
- Local add-ons: cities and counties often add their own percentage, as with New Jersey's municipal tax.
How do states spend cannabis tax revenue?
Spending rules come from each state's legalization law, so the money rarely lands in one place. Common destinations include K-12 schools, behavioral health and addiction treatment, police and public safety, environmental cleanup, and the general fund.
Colorado sends the first slice of its excise revenue to school construction. Illinois divides collections among the general fund, restorative justice grants, mental health services, and law enforcement. Washington and Oregon direct large shares to the general fund, schools, and local governments.
Which states collect the most cannabis tax revenue per person?
Per-capita rankings reward smaller states with heavy tourism and a high tax rate. Washington and Colorado consistently rank at or near the top, with Montana, Nevada, and Alaska also posting strong per-resident figures in recent years.
Why does cannabis tax revenue vary so much between states?
- Market size: California has roughly 40 million residents, so even a moderate tax rate produces a large total.
- Tax rate and structure: high excise rates raise more per sale but can push buyers toward the illicit market.
- Price direction: falling wholesale prices cut collections in states that tax a percentage of price.
- Licensing and local bans: cities that opt out of retail reduce statewide collections.
- Tourism: destination markets sell to visitors, which lifts revenue above what the resident population alone would support.
Have states met their cannabis revenue projections?
Many have not. California, Colorado, and Oregon all saw tax collections slip from early peaks as legal prices fell and illicit sales continued. Newer markets such as Missouri and Illinois have generally tracked closer to or above their forecasts.
Frequently asked questions
Which state collects the most cannabis tax revenue?
California collects the most in total dollars, topping $1 billion a year. Washington and Colorado collect the most per resident.
Which state has the highest cannabis tax rate?
Washington's 37% retail excise tax is the highest single statewide rate, and Illinois reaches 25% on high-potency products before sales tax is added.
Do cannabis businesses pay federal taxes?
Yes. Cannabis companies owe federal income tax, but Section 280E has barred them from deducting most ordinary business expenses, which raises their effective federal tax bill.
Is cannabis tax revenue a large share of state budgets?
No. Even in the top states, cannabis taxes make up a small fraction of total state tax collections, typically less than 1%.