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Washington State: Medical Marijuana Retailers Must Pay Sales Taxes


 The Washington State Liquor Control Board recommends medical marijuana patients be allowed to grow up to 6 plants for their own use.

It has been Washington State Department of Revenue is increasing education outreach efforts about medical marijuana.

On Friday, January 3, 2014, the Revenue sent letters to “several hundred businesses and organizations that provide medical marijuana, ‘medibles,’ and related products….” These include collectives and cooperatives, dispensaries, nonprofit organizations, and “businesses that should be—but are not—registered with Revenue or paying taxes.” The letters explain the tax obligations of each seller.

Retail sales of medical cannabis are currently subject to sales and use tax. According to the Washington Department of Revenue, some sellers of medical marijuana “may owe back taxes for prior periods.” Revenue will work with those sellers to settle those bills and to increase compliance moving forward.

Same tax structure for medical and recreational marijuana, with an exemption

The Washington State Liquor Control Board (WSLCB) is tasked with regulating recreational pot and with developing a way to integrate the medical and recreational marijuana industries. In December, WSLCB recommended that all medical marijuana use “the same tax structure as recreational marijuana, but provide an exemption from state and local retail sales and use taxes on purchases by medical marijuana patients registered with the Department of Health.”

The Liquor Control Board recommended that qualified medical marijuana patients registered with the Department of Health:

  • Be allowed to grow up to six plants for personal use;
  • Be exempt from state and local retail sales and use taxes

Under Initiative 502, the tax structure for marijuana is as follows:

  • Producers pay 25% excise tax on wholesale sales and B&O tax as a wholesaler;
  • Processors pay 25% excise tax on wholesale sales and B&O tax as a manufacturer;
  • Retailers 25% excise tax on wholesale sales, B&O tax as a retailer, and collect state and local sales and use tax; and
  • Retail buyers pay state and local retail sales and use tax .

A marijuana license is required to sell recreational pot in Washington, and on December 20, 2013, that application window for marijuana licenses closed.

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photo credit: Scott Beale 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.