Marijuana and taxes have always been uneasy bedfellows, ever since marijuana was banned by an act of Congress in 1937. Back then, prohibition was enforced in the name of taxation, which effectively placed a prohibitive tax on marijuana, and penalized those who were unable to pay the cost. Of course, we now know that these measures simply served to ban the use of marijuana under the guise of tax laws, which makes it all the more ironic that taxation once again comes to the forefront of the marijuana issue. However, the difference is that the taxation of marijuana may now bring an end to marijuana prohibition as we know it.

flowering close upIt was in the fall of 2012 that voters in Colorado and Washington supported legalization by way of two landmark laws: I-502 in Washington and Amendment 64 in Colorado. These two laws underscored the value of legal marijuana as a revenue generator for the government.

The issue is far from clear-cut however. This early on, it is apparent that the implementation of taxes may not be the solution to getting rid of the black market that has risen up as a result of marijuana prohibition. This issue isn’t lost on UCLA’s Mark Kleiman, who as the university’s “drug expert” serves as an adviser to government marijuana regulatory bodies. Like many in the industry, Kleiman has voiced concerns that taxation may stand in the way of marijuana legalization.

The issue is especially significant in Washington, where I-502 mandates a 25% “excise tax” to be levied at three points of sales: from marijuana producers to processors; from processors to retailers; and from retailers to consumers. With the addition of the standard sales tax of 8.75% as mandated by state law, these taxes would result in a 58% increase in the retail price of marijuana. As it is, the taxes alone would comprise approximately 37% of the retail price paid by marijuana consumers.

With the passage of I-502, an ounce of marijuana in Washington may end up costing users from $482 to as much as $723. This represents a huge increase from the current prices of $239 an ounce. The implications of this price increase are significant. With taxation resulting in a two- and three-fold increase in the price of legal marijuana, patients are just as likely to turn to the marijuana black market for their needs as they are to the “gray market” providers that largely operate untaxed and unregulated. With the exorbitant costs that taxation will tack on to legal marijuana, there is little encouragement for medical marijuana users to get their medicine through legal channels.Marijuana & Cash

The government is clearly caught between a rock and a hard place. On the one hand, there is the need to tax marijuana in order to generate revenue for government coffers. On the other hand, the taxes levied on medical marijuana may raise prices to the extent that getting marijuana from illegal sources is the more cost-effective option. Until the issue is resolved, legalization may not be the solution that the government expects.

If you would like to know more about the medical marijuana industry and how taxes affect the price of marijuana, call us today and we will provide you with the information you need.

About the Author: Brian Ellis

With 6 years' experience in business journalism, Brian is the person we turn to for anything related to the business of cannabis. His news coverage spans topics including marijuana business and finance. Brian's work features on,, , and

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