Legal Weed States Across the US Raked in a Whopping $3 Billion in Tax Revenue in 2020
State and local weed tax revenue climbed by 58 percent from 2019 to 2020, boosted by new adult-use markets in Illinois, Michigan, and Maine.
Published on March 29, 2021

Most people will probably count 2020 as one of the most challenging years in recent history, but for the US cannabis industry, it was the best year yet. Last year, state-legal weed retailers moved nearly $18 billion worth of product, and over $3 billion worth of that money went straight into the coffers of state and local governments.

As a whole, legal weed revenue accounts for a relatively small portion of state budgets, but these taxes are also the fastest-growing tax income segment in the country. According to a new report by the Institute on Taxation and Economic Policy (ITEP), state and local governments collected $3.02 billion in adult-use cannabis tax revenue last year, up 58 percent from the $1.91 billion collected in 2019.

Out of all states, California has the highest cannabis taxes, so it's no surprise that the Golden State tops the list of pot tax revenue collection. Last year, California snatched up over $1 billion in pot taxes, accounting for more than a third of all weed tax revenue in the entire country. Washington, the next-highest earner on the list, collected $659 million, or 22 percent of the country's total, and Colorado is in at a close third with $444.5 million, or 15 percent of the total share.

Illinois just started selling legal weed on January 1st of last year, but it has already grown to become the fourth-largest weed tax earner in the nation. By the end of 2020, tax officials collected $250.5 million, accounting for 8 percent of the country's total weed tax haul. Michigan and Maine, the other two states that started selling weed last year, had far less success, though. These states are near the bottom of the list, collecting $83.3 million and $0.9 million respectively.

Cannabis sales exploded to new heights last year as people flocked to their local weed stores for relief from stress, boredom, and health issues exacerbated by the pandemic. Because of this, most states with existing adult-use markets saw massive gains in revenue from 2020 to 2019. California leads the pack again, with a shocking 62 percent growth over 2019. Massachusetts also saw an impressive gain of 57 percent as its market matured.

Oregon also saw its weed tax revenue grow by 37 percent in 2020, and Washington, Colorado, and Alaska all saw gains of 26 to 28 percent. The only outlier here is Nevada, where revenue only grew by 14 percent, from $164.8 million in 2019 to $188.4 million last year. This is likely due to the fact that Nevada's overall economy depends heavily on tourism, an industry that was crippled by the pandemic. 

The ITEP report forecasts that 2021 will see weed taxes grow even higher, especially since New Jersey, Vermont, and Montana all plan to open adult-use markets this year, and Virginia may join them. 

The analysts also predict that federal legalization could radically alter the landscape of legal weed taxes. Federal legalization would allow people to have weed shipped from states with lower prices, which would likely cause the overall price of legal weed to fall in general. Because of this, states that tax weed based on price would lose money, while those that tax pot by weight would continue to rake in revenue.

Chris Moore
Chris Moore is a New York-based writer who has written for Mass Appeal while also mixing records and producing electronic music.
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