If we want to know about cannabis taxes so, from the family of cannabis, only marijuana is levied on legal purchases for recreational use. Some stats allow including cannabis tax in New York with low rates of the purchase of marijuana for medical use. Marijuana is legalized in many states, which has led to a boom in the cannabis industry, but also it faces unique challenges regarding cannabis tax and accounting services.
Other than the legislation allowing the cultivation, production, testing, and sale of cannabis (marijuana) products, the law makes it essential that industries and companies engaged in activities that work with tax and accounting services prepare those with experience and knowledge in their unique regulatory environment.
Cannabis taxes are prohibited under federal law, but 19 states have enacted some tax on recreational cannabis. As it is understood, every state has its taxes rates, such as percentage of the price of taxes, weight-based taxes, potency-based taxes, and some levy multiple cannabis taxes.
Cannabis taxes refer to sin tax because the tax is levied to address the negative effect of marijuana use, including addiction and impaired decision-making. It is known that cannabis has adverse effects and documented benefits. A cannabis tax is not typically meant to discourage overall consumption.
In recent months on September 2022, 19 states enacted this tax. Among them are Rhode Island, Vermont, Virginia, Connecticut, and New York, which have not yet begun taxable taxes. The cannabis tax in New York is 13%, based on price percentage.
DIFFERENT TYPES OF CANNABIS TAXES
As mentioned above, there are three main sets of cannabis taxes and accounting services for recreational marijuana.
- Percentage of price
- Potency based
Percentage of price:
this type of tax typically works like a general sales tax in that tax is calculated as a portion of the retail price paid by the customers, in addition, to buying at checkout, and it’s remitted to the government by the retailer. Like the other taxes, a cannabis tax in New York is typically higher than the government’s general sales tax rates. In some states, cannabis tax rates range from 10 percent to 37 percent, and local cannabis taxes are typically capped between 2 percent and 5 percent. Among those 19 states, the price percentage is popular because eleven use this tax, and five use it in addition to another tax.
the five states where taxes are weight-based are Alaska, Colorado, Maine, Nevada, and New Jersey. With the respective tax in these states, the cultivator, a cannabis grower, is responsible for remitting the tax to the government, and the different parts of the plants are taxed at different rates.
the last type of tax is calculated based on the cannabis production level of THC, which is tetrahydrocannabinol, the primary psychoactive compound in cannabis. This potency-based roughly mirrors state alcohol taxes where higher tax rates are applied to a product containing a higher concentration of alcohol.
Cannabis taxes are different in every state depending on the production and usage. It’s not entirely prohibited but has its respective cannabis tax and accounting services.