• Massachusetts: Recreational Marijuana Taxes Increase Before it is Available for Sale
  • August 25, 2017 | Authors: David M. Kall; David D. Ebersole; Michelle Rood
  • Law Firms: McDonald Hopkins LLC - Cleveland Office; McDonald Hopkins LLC - Cleveland Office
  • In November 2012, 63.3 percent of voters approved Massachusetts’ medical marijuana initiative, An Initiative Petition for a Law for Humanitarian Medical Use of Marijuana, making it the 18th state in the nation, along with the District of Columbia, to legalize medical marijuana.

    Four years later, by a vote of 53.6 percent to 46.3 percent, voters did the same for recreational marijuana with the Massachusetts Marijuana Legalization Initiative (also known as Question 4). Both were citizen-initiated efforts.

    The initiative permits individuals who are at least 21 years old to use, grow, and possess marijuana, subject to a 3.75 excise tax, and the state’s sales tax of 6.25 percent. Local municipalities have the option of adding another 2 percent tax. The tax revenues, license application fees, and fines for minor violations are put into the Marijuana Regulation Fund, helping to pay for the new law’s administrative costs.

    Even though the initiative called for a start date of Jan. 1, 2018, lawmakers voted for a six-month postponement in December. The Senate president justified this move on the grounds that "[t]he legislature has a responsibility to implement the will of the voters while also protecting public health and public safety. This short delay will allow the necessary time for the Legislature to work with stakeholders on improving the new law.”

    On July 28, 2017, Gov. Charlie Baker signed H. 3818 into law, thereby changing key provisions of the initiative once again. H. 3818 increases the excise tax on marijuana sales from 3.75 percent to 10.75 percent, bringing the total state tax (including the 6.25 sales tax rate) to 17 percent. The measure also increases the rate that localities may impose, from two percent to three percent.

    This tax increase has been in the works for months. Last October, even before voters weighed in on Question 4, a MassLive.com piece reported that the state treasurer was critical of the rates for being too low relative to other states’ pot taxes. She opined that the rates “pale in comparison…There's something wrong with this revenue picture.”

    The Tax Foundation corroborates this view. Of the eight states that have legalized recreational marijuana, Massachusetts’ new 10.75 percent excise tax is among the lowest

    STATE

    EXCISE TAX RATE

    Washington

    37%

    Oregon

    17%

    Nevada

    15% on first wholesale sale and 10% retail excise tax

    California

    15% on gross receipts of retail sales tax on cultivators:
    - $9.25/ounce of flowers
    - $2.75/ounce of leaves

    Colorado

    15% excise tax on the average market rate of retail marijuana

    Massachusetts

    10.75%

    Maine

    10% sales tax; lawmakers are considering an increase to 20%


    Alaska’s tax is $50 per ounce of marijuana, levied on cultivators.

    The group cautions that because Massachusetts will tax recreational marijuana, but does not currently do so for medical marijuana, there is a risk of a so-called gray market. This could enable “people with medical cards [to] resell their untaxed marijuana to those without medical cards.”

    The Marijuana Policy Project noted that although Question 4 “won a decisive victory,” lawmakers were interfering, causing some controversy. “Fortunately, thanks to thousands of supporters making calls and pressuring lawmakers, the legislature ultimately discarded a flawed proposal from the House and instead passed a compromise bill that largely respects the will of the voters.”