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Marijuana: What Retailers Need to Know

  • Jul 15, 2013 | Gail Cole

 Absinthe has outgrown its old image. Can marijuana do the same?

Absinthe was banned for decades in many countries, including this one, because it was thought to cause hallucinations and murderous intentions. Similarly, marijuana has long been outlawed in this country because it is a "mind-altering drug" that in high doses can cause "mental confusion, panic reactions, and hallucinations."

Yet experts now agree that absinthe isn't so bad, provided it's consumed in moderation (it's alcohol level ranges between 55% and 72%). Today, the anise aperitif is once again a legitimate member of society. As if vying for good citizen of the year, marijuana proponents note that it can be used to prevent glaucoma, suppress nausea, relieve pain, and generally help folks feel good (Business Insider).

Will marijuana one day find the same level of public acceptance as absinthe? 

Medical marijuana

Marijuana has been used medically in the United States since the late 19th century, and it's medicinal value has been recognized in many parts of the world for thousands of years. As of this writing, it is legal to use marijuana for medical purposes in the following 18 states and the District of Columbia:

Home cultivation is permitted in all of the above states except Connecticut, Delaware, New Jersey and the District of Columbia. Arizona, Massachusetts, Nevada and allow home cultivation with some restrictions. New Mexico requires folks who want to grow their own to get a special license. All but Oregon, and possibly Delaware, require proof of residency to purchase pot.

Some states are on the fence. They don't really want to prosecute people for using marijuana to ease their pain or stimulate their appetite, but they don't really want to encourage such use, either.

Maryland, for example, has allowed people being prosecuted for use or possession to "introduce evidence of medical necessity and physician approval, to be considered by the court as a mitigating factor" since 2003. Earlier this year, two medical marijuana laws made the books in Maryland. One "provides an affirmative defense to a prosecution for caregivers of medical marijuana patients." Another "allows for the investigational use of marijuana for medical purposes by 'academic medical centers.'"

Recreational marijuana

Recreational use of marijuana does not have the level of acceptance as its medicinal counterpart. To date, only two states have legalized recreational marijuana: Colorado and Washington. Alaska is looking into legalization. Maine lawmakers recently killed a legalization measure.

Marijuana and taxes: what retailers need to know

It has been said that nothing is certain in life except death and taxes. It seems to be equally true that there is no legalized marijuana without taxes.

The New York Times reported in February 2012 that "struggling cities turn to a crop for cash"--the crop being medical marijuana, the cash, tax revenue. Recreational marijuana will surely follow the same path. Sales of medical marijuana generated $5.4 million in sales tax revenue in fiscal year 2012-13 in Colorado, where voters will be asked to approve a 10% sales tax on retail [recreational] marijuana this fall. Meanwhile, Washington is set to impose a 25% excise tax "on each level of the system," for sales of recreational marijuana, as well as B&O taxes and state and local sales taxes. And legalization in Alaska may well hinge on revenue potential; certainly current considerations focus on the fiscal impact of legalization.

Retailers of both medical and recreational marijuana should be prepared to pay steep licensing fees and to collect and remit tax revenue. Failure to do so will surely add penalties and interest to operational costs, and perhaps worse. Marijuana may no longer be banned nationwide, but it has not achieved the level of acceptance that absinthe has found, dubious though that may be.

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photo credit: Double--M via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.