State Cannabis Excise Tax — Wholesale vs. Retail Excise Structures

💡 Accountant's Note

Each state that has legalized cannabis has implemented a different excise tax structure, creating enormous complexity for multi-state operators. Two primary structures: (1) RETAIL EXCISE TAX (California, Nevada, Arizona): applied when the consumer purchases cannabis at the dispensary. The dispensary collects the tax from the consumer (15% in California) and remits it to the state. For the dispensary: this is a PASS-THROUGH TAX — not the dispensary's expense or revenue. (2) WHOLESALE EXCISE TAX (some states tax the weight or THC content): applied when the cultivator sells to a processor or retailer. This is the cultivator's EXPENSE (not collected from the downstream customer — the cultivator bears the cost). Rate examples: California cultivation tax (weight-based, repealed 2022): formerly $9.65/oz of dried flower, $2.89/oz for leaves. Michigan: 10% excise at retail. Illinois: 10% excise on recreational cannabis + 3.75% on cannabis with THC >35%. Colorado: 15% special retail excise + standard 2.9% state sales tax. For multi-state operators: each state's excise tax type, rate, and remittance schedule must be separately maintained — 20 states = 20 different excise tax compliance programs.