Analysis: Tax Revenue from Legal Cannabis Sales Tops $3 Billion in 2020

Washington, DC: Tax revenue from state-legal cannabis sales rose significantly in 2020, according to an analysis by the Institute on Taxation and Economic Policy.

Authors reported, “Powered by an expanding legal market and a pandemic-driven boost in cannabis use, excise and sales taxes on cannabis jumped by more than $1 billion in 2020, or 58 percent, compared to a year earlier. In total, these taxes raised more than $3 billion last year, including $1 billion in California alone.”

Transactions specific to the commercial market in California were responsible for over one-third of the nation’s total cannabis tax growth in 2020. Year-over-year, cannabis tax revenue rose some 40 percent in the state.

Significant growth in revenue also occurred in 2020 in states with more established markets, such as Colorado and Washington.

Overall, the report acknowledged that cannabis-related tax revenues still comprise only a small percentage of states’ overall budgets. However, authors emphasized that these tax revenues are among “states’ fastest growing revenue sources.”

Full text of the ITEP analysis is online. Additional information is available in the NORML fact sheet, “Marijuana Regulation: Impact on Health, Safety, Economy.”