Cannabis Cactus Magazine is most popular in the Southwest United States, which gives us more insight into our readers’ favorite products, retail locations and more ideas into the legal cannabis market.
The United States cannabis market has been projected to reach 51 billion in 2023, and while revenue shows a promising growth rate, these figures are a bit high considering fiscal changes in the market and the effects on retail revenue in a strained market. Adding the constraints from doing business within a regulatory framework makes the actual revenue figures much less, estimated at 30 to 35 billion dollars realized revenue. In 2022, the United States reported a combined 15 billion in tax revenue from recreational cannabis sales, not including any medical transactions. Currently, 38 states have a medical marijuana program in place while 23 of states are also selling legal recreational cannabis within their borders.
California recreational cannabis customers pay a 15% cannabis excise tax in 2023. This is along with a sales tax and cultivation tax, which was eliminated in 2022 as a result of reforms to help wholesalers and retailers suffocating under local tax burdens. On top of the 15% state excise tax, recreational cannabis customers also expect to pay an 8% sales tax locally in cities like San Diego. This makes every cannabis purchase 23% more expensive for a recreational consumer. This increases a $30 eighth to $45 at the register, which is why customers often turn back to the traditional market where market prices have never been affected by levies and taxes.
California cannabis tax revenue goes into a general fund used to pay for youth services and other city projects under prop 64. However, this tax revenue has gone almost entirely to the police, because dispensaries need protection from daily threats of crime and robbery. There have been so many dispensary robberies in California that city legislators have suspended several extraneous cannabis taxes to help keep businesses from closing under financial stress.
Profit margins are too small and the liability from criminal activity is too great, leaving cannabis businesses in California feeling more helpless against regulators than operators in other recreational states.
Cannabis dispensaries are already strained under low profit margins from oversupply and lots of competition in retail markets. Each state has different amounts of licenses and recreational locations, but profit margins still range between 15-20% for the best performing businesses in the retail cannabis sector.
New Mexico state offices reported in April of 2023 that more than $27 million in excise tax has gone into the state's fund, to be distributed back into local communities through education and other planned changes.
This tax revenue is raised from customers who are paying a 5.13% sales tax for recreational marijuana. There is an additional sales tax excise tax of 12% for recreational marijuana, bringing the total to just over 17% for each recreational customer purchase.
This is an industry standard on the low side, as some states taxes edge over 20% up to 23% for each purchase of cannabis made.
As the number one market in the Southwest and second only to California, Arizona excise tax for recreational marijuana has yielded over 150 million so far in 2023. Arizona passed recreational marijuana in 2021, and had a first year tax revenue of 33 million dollars. 2022 saw a quick jump in Arizona cannabis revenue taxes combined over 130 million. 2023 is set to increase, but at a slower rate, collecting nearly $175 million as of August 2023. Arizona customers pay a 16% excise tax to the state plus additional local taxes added at the time of purchase. Sales taxes are usually between 7-8.5%, making the total tax almost 24% on a marijuana purchase. For a $50 product this amounts to over $12 in taxes.
The crippling taxes are also another reason dispensaries have to sell at a lower cost to keep their customers from returning to the traditional street markets, where prices are more stable and quality is always great. This is a struggle for dispensaries to compete with traditional markets with added pressure from state taxes and local regulators. We need to give dispensary owners a break and open up the markets to see what these businesses are truly capable of. Until then, they are confined to less innovation and much less industry evolution.
The best way to save money on the excise taxes is to become a medical marijuana card holder. These programs remain in many states and easily pay for themselves with tax savings to the consumer. California is among the cheapest place to get a medical marijuana card, while states like Arizona a medical marijuana card can cost up to $300 but last for 2 years. The cost is easily recoverable, but many cannabis consumers cannot afford a $300 up-front charge to become part of the tax-free weed club. The other advantage for medical consumers, aside from lower taxes, is the ability to purchase more cannabis legally. They are allowed higher allotments and higher limits for THC dosages within edible products.
Colorado regulators decided that the marijuana tax cash fund would benefit health care, health education, substance abuse prevention and treatment programs, and law enforcement. Denver regulators have been some of the most efficient at using their cannabis tax revenues as a goodwill stimulus in the community. While I was visiting Denver, I noticed beautiful free skateparks used by children and families across the city. The motivation for building community skateparks was that the city basically ran out of things to do with cannabis revenue and started entertaining citizen requests, installing modern concrete skateparks with deep bowls and rails for the kids to practice skating on.
Denver residents pay a 15% excise tax on retail cannabis purchases, but recreational marijuana is exempted from general sales tax. Colorado has a 15% wholesale excise tax on marijuana and a 15% retail excise tax. Colorado's total tax revenue to date from 2014 to July 2023 is over 2.5 billion. In January-July of 2023, Colorado generated $163.6 million dollars in cannabis tax revenue totals.
Look around your local city, highways, schools and libraries to see if any improvements are making their way to your community from this cannabis tax revenue. If not, please be vocal and attend your city council leader meetings. As a citizen, you have a voice and a right for this money to fight for this revenue to impact your community. Remember that the squeaky wheel gets the grease, and it's our duty to make sure regulators are responsible for dispersing these large sums of cannabis tax revenue.