Which State Has the Lowest Cannabis Tax Rate? Alaska Leads

Which State Has the Lowest Cannabis Tax Rate?

Alaska. It carries the lightest cannabis tax load of any adult-use state. Alaska charges no state retail excise tax on cannabis and no state sales tax. The only state levy is a cultivator tax paid by growers: $50 per ounce of flower, $25 per ounce of trim, and $15 per ounce of other plant material. Cities and boroughs may add a local sales tax of up to 7 percent, and several add nothing at all. If you are comparing retail excise rates only, Missouri is the lowest at 6 percent of the sale price.

how are cannabis taxes calculated at dispensary

Alaska Cannabis Taxes at a Glance

• State retail excise tax: none
• State sales tax: none
• Cultivator tax on flower: $50 per ounce
• Cultivator tax on trim: $25 per ounce
• Cultivator tax on other plant material: $15 per ounce
• Local sales tax: 0 to 7 percent, set by each municipality

Because the state tax is collected at the cultivation stage instead of the register, the amount baked into a retail price is small. A grower who produces at typical commercial yields pays a few dollars per ounce of flower, which works out to a single-digit percentage of the shelf price.

cannabis excise tax rates by state map

Missouri: The Lowest Retail Excise Rate

Missouri applies a 6 percent excise tax to adult-use cannabis at the point of sale. That is the smallest retail excise rate among states with legal adult-use sales. Cannabis in Missouri also carries the state sales tax of 4.225 percent plus local sales taxes, so a receipt in a larger city lands higher than 6 percent once everything stacks. The 6 percent excise line is still the cheapest per dollar of any retail cannabis tax in the country.

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Other States With Low Cannabis Taxes

• New Jersey: 6.625 percent sales tax plus a 2 percent retail excise, with no local cannabis tax on top.
• Maryland: 9 percent cannabis tax, and cannabis is exempt from the state sales tax.
• Maine: 10 percent adult-use excise plus the 5.5 percent general sales tax.
• Minnesota: 10 percent gross receipts tax, with cannabis exempt from standard sales tax.

Why "Lowest" Depends on How You Measure

Three tax designs make state-by-state comparisons messy. Retail excise states charge a percentage at the register, which shoppers see on the receipt. Cultivation and wholesale states tax growers or distributors, which hides the cost inside the shelf price. Sales-tax states simply apply the existing general sales tax, sometimes with local add-ons. A state can look cheap on one measure and expensive on another.

Medical programs add another layer. Several states tax medical cannabis at a reduced rate or not at all, so a patient with a valid card can pay less than any recreational shopper in the country.

How to Check the Rate You Will Pay

1. Open your state revenue department website and find the cannabis tax page.
2. Note whether the tax is charged at retail, wholesale, or cultivation.
3. Add the state sales tax rate for your state.
4. Add the local sales tax rate for the city where the shop sits.
5. Ask the dispensary for a receipt that separates excise tax, sales tax, and product price.
6. Divide the total tax by the pre-tax subtotal to get your real effective rate.

Bottom Line

Alaska wins on total state cannabis tax burden because it skips retail excise and state sales tax altogether. Missouri wins on the retail excise rate at 6 percent. If total tax paid at the counter matters most to you, Alaska is the cheapest state, and a medical card in a low-tax medical state can beat both.