Politics
States Made More Than $5.7 Billion In Marijuana Tax Revenue Over 18-Month Period, New Federal Census Bureau Report Shows
The U.S. Census Bureau has released its first report on state-level marijuana tax revenue data following what the agency calls “a complete canvass of all state agencies” going back to July 2021. In the 18-month period between then and the end of 2022, the data show, states collected more than $5.7 billion from licensed cannabis sales.
The launch of the report, which the agency plans to update on a quarterly basis going forward, signals that at least some parts of the federal government are now beginning to treat the cannabis industry as a legitimate sector of the economy. The Census Bureau first announced in January 2021 that it would begin collecting marijuana tax figures for its quarterly summary of state and local government tax revenue. It also said it wants states to submit cannabis revenue data as part of annual reports as well.
The first edition of the quarterly data was published late last month, just weeks after the bureau announced it would separately update its survey of American businesses to better marijuana-related economic activity.
Together, the new tracking and reporting efforts—which come nearly a decade after the first state-legal sales of adult-use cannabis in the United States—indicate an increasing willingness by the federal government to acknowledge the billions of dollars flowing into state coffers annually as the result of state-level marijuana legalization, even as the substance remains federally illegal.
Totals from various U.S. states reflect both the size of individual state markets and the amount of time they’ve been open for business. For example, Washington state and Colorado—the first two states to legalize nonmedical marijuana—collected the second- and third-most tax revenue ($818.5 million and $648.1 million) during the period included, respectively.
California’s massive market, meanwhile, produced more than $1.4 billion in sales tax revenue over a year and a half, while revenue in New York—where only about two dozen retailers have opened statewide since sales began in December 2022—totaled just $27.9 million.
The Census data includes sales from both medical and adult-use markets and does not disaggregate the revenue between the two.
The new data “result from a complete canvass of all state government agencies,” the bureau said in a note about the survey methodology. While it initially refers to the revenue as “quarterly cannabis excise sales tax collections,” it later says that “taxes” are defined rather broadly.
“For this dataset, the concept of ‘taxes’ is comprised of all compulsory contributions exacted by a government for public purposes,” Census said. “Tax revenue is further defined to include related penalty and interest receipts of a government but to exclude protested amounts.”
The bureau has two separate tax codes for marijuana revenue that it asks states to report, one for taxes on cannabis transactions and another for business license fees. It’s not clear whether the totals in the new report include sales tax figures alone or revenue from both categories. A Census spokesperson didn’t immediately respond to a request for clarification on Monday.
The agency said its own figures might not align perfectly with state-reported data “because the Census Bureau may be using a different definition of which organizations are covered by the term, ‘state government.'” The bureau’s definition, it explains, “refers not only to the executive, legislative, and judicial branches of a given state, but it also includes agencies, institutions, commissions, and public authorities.”
That likely means tax revenue retained by city and county governments is captured in the state numbers, because those funds are typically collected by state officials before being disbursed to municipalities.
Further, dates for the reported data are somewhat unusual. As Census says in its methodology section, “cannabis excise sales taxes reported for a particular quarter generally represent taxes collected on sales made during the prior quarter (i.e. data released in September 2023 will cover sales during the quarter ended June 30, 2023).”
🆕 #Cannabis tax data reported for our Quarterly Summary of State and Local Government Tax Revenue survey is now available.
Explore data for your state: https://t.co/bXtTo5aVp6#CensusEconData #StateGovernment #LocalGovernment pic.twitter.com/X8SpQwjEVa
— U.S. Census Bureau (@uscensusbureau) September 28, 2023
Marijuana industry representatives welcomed the federal acknowledgement of the sector’s economic contribution, but said that much more change—including reforms to tax laws and ongoing criminalization—are needed.
“This data highlights the fact that legal cannabis markets are making positive contributions to their communities,” Aaron Smith, executive director of the National Cannabis Industry Association, told Marijuana Moment. “However, we still aren’t even close to reaching our full potential to replace criminal markets with tax-paying, regulated businesses.
“It’s long past time for lawmakers to take action to improve conditions for the industry so the we can make an even more positive impact.,” he said. “Reforming outdated banking regulations and 280E would immediately help the existing state-based markets to grow and generate even more tax revenue. And, ultimately we need federal descheduling to truly unleash the industry’s full potential as an economic engine.”
Kaliko Castille, president of the Minority Cannabis Business Association, said that “this move by the Census Bureau is yet another sign that decades of advocacy has helped to bring the cannabis industry into the mainstream of the American economy and that the genie won’t be put back in the bottle.” But he also pointed out the “irony” of the federal government maintaining the 280E provision, which prevents marijuana operators from writing business expenses off their taxes like operators in other industries can.
“Whenever you are trying to change laws, one of the strongest ways to support your case is to have data to back it up. With the Census Bureau tracking this kind of data, advocates will now have official data from the federal government to point to when it comes to the economic impact of the cannabis industry,” Castille said. “Not only is our industry employing hundreds of thousands of people across legal states, we now have proof that we’re generating billions of dollars in tax revenue.”
David Culver, senior vice president of public affairs for the U.S. Cannabis Council, said the group is “thrilled to see the Census Bureau collect and analyze data on the growing number of state cannabis markets around the country.”
“Legalizing and regulating cannabis is not only the right thing to do, it’s fiscally prudent,” he said. “The new Census Bureau analysis is another promising sign that the federal government, under the direction of President Biden, is modernizing its approach to cannabis and preparing for the end of federal prohibition.”
One notable trend in the newly published Census data is an overall dip in nationwide marijuana tax revenue during the reporting period. While the second quarter of 2022 saw a peak of about $839.6 million in total cannabis taxes across all legal states, otherwise revenue trended downward between the third quarter of 2021 ($772.1 million) and the second quarter of 2023 ($606.5 million).
Notably, the current Census Bureau reporting period does not include the bulk of sales from this year, during which some states have broken monthly sales records multiple times.
In Illinois, for example, officials recently touted the industry’s “unprecedented growth” in fiscal year 2023, with regulated stores selling more than $1.5 billion in marijuana products. In September, stores in the state sold more individual cannabis products than during any prior month. Tax revenue, however, dropped in fiscal year 2023, falling to $420.9 million from a record $435.1 the previous year. As in past years, Illinois made significantly more revenue from cannabis than from alcohol, which brought in about $316.3 million during the same period.
Licensed retailers in Maryland, meanwhile, sold a record amount of adult-use cannabis products in September even as medical marijuana sales fell.
In New Mexico, monthly sales in September narrowly missed a monthly sales record set in August as the state crossed the half-billion-dollar mark in total adult-use sales.
August was also a record-setting month in Rhode Island, which sold its highest amount of cannabis for the fourth consecutive month, notching $9.7 in monthly receipts.
Purchases of adult-use cannabis in August also broke a record ($23.7 million) in Montana, state officials reported, although medical marijuana sales were at their lowest ($5.0 million) since recreational markets opened early last year.
Connecticut also broke another marijuana sales record in August, with $25 million worth of medical and adult-use cannabis purchases, state data show.
In Maine, too, marijuana sales reached a record high in August, with nearly $22 million worth of purchases, according to recent data from the state Office of Cannabis Policy (OCP).
Early last month, Massachusetts officials reported that retailers have now sold more than $5 billion in adult-use marijuana since the state’s recreational market launched five years ago. Sales reached $139.3 million in August alone, with the year-to-date total at $1.05 billion within the first eight months of 2023.
Michigan marijuana sales also reached another record high in July, with nearly $277 million worth of cannabis sold.
In Missouri, meanwhile, retailers have been selling about $4 million worth of marijuana per day on average since the state’s adult-use market opened up in February—and the state saw a record $121.2 million in cannabis purchases in June.
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