Every legal dispensary in the United States charges tax, and the tax at dispensaries is heavier than at almost any other kind of retailer. Depending on the state and the city, combined taxes add roughly 15% to over 45% on top of the shelf price. That total is built from a special cannabis excise tax, the same state and local sales taxes you pay on other goods, and sometimes an extra municipal cannabis surcharge. A federal tax rule also pushes the pre-tax shelf price higher than it would otherwise be.
The Cannabis Excise Tax
The biggest tax line at a dispensary is usually the state cannabis excise tax, a special levy that applies only to marijuana products and sits apart from any general sales tax. States structure it in three main ways, and the structure changes how much you pay.
- Percentage of price. This works like a normal sales tax and is the most common approach. Rates run from 6% in Missouri to 37% in Washington, with most states between 10% and 20%.
- Weight-based. A few states tax by the ounce. Alaska charges $50 per ounce of mature flower, $25 for immature flower, and $15 for trim. The tax is collected from cultivators, but the cost is passed through to you in the retail price.
- Potency-based. Connecticut, Illinois, and New York factor THC into the calculation. Illinois applies a 10% retail tax on products at 35% THC or less and 25% on anything above 35% THC.
Some states combine methods. Maine layers a percentage-of-price retail tax on top of a weight-based cultivation tax. Colorado applies separate excise taxes at both wholesale and retail. Two products on the same shelf can carry very different effective tax rates depending on weight, potency, or how many tax layers they passed through on the way to the counter.
Sales Tax and Local Add-Ons Stack on Top
Cannabis is also subject to ordinary state and local sales taxes, the same kind you pay on furniture or electronics, calculated on top of the excise tax. This stacking is where the total climbs fast.
A dispensary in a state with a 15% cannabis excise tax might also sit in a jurisdiction with a 7% state sales tax and a 3% local tax. That is 25% before anything else. Municipalities in several states can then add their own cannabis-specific tax. In Illinois, Chicago customers pay up to 6% in combined city and county cannabis taxes beyond the state’s excise and sales taxes.
Because local rates vary by zip code, two dispensaries a few miles apart can charge noticeably different totals for the same product. Sales tax usually appears as its own line on the receipt. The cannabis excise tax may or may not be broken out, depending on the state.
What the Total Actually Looks Like
Add every layer together and recreational cannabis carries somewhere between about 15% and over 45% in total tax. Washington sits at the top: the 37% excise tax plus standard sales taxes push the combined rate to roughly 47%. Oregon (17% excise, no general sales tax) and Michigan (10% excise plus 6% sales tax) land in the middle.
A concrete example: a $50 pre-tax purchase in a state with a 20% excise tax and an 8% combined sales tax rings up at about $64. The same product in Washington could cost close to $74. That gap is why comparison shopping across state and city lines is common in border areas, and why the receipt total often looks nothing like the sticker.
Medical Card Holders Usually Pay Less
Patients with a valid state medical marijuana card generally pay less tax than recreational buyers, but the size of the discount varies a lot by state.
The most common break is an exemption from the standard sales tax. At least nine states fully exempt medical cannabis from their general sales tax, including California, Connecticut, Massachusetts, Minnesota, New Jersey, and New York. Fewer states waive the cannabis excise tax. Nevada exempts medical patients from its 10% retail excise tax. New Jersey exempts medical cannabis from both sales tax and excise fees. Arizona goes the other direction and exempts medical patients from the excise tax while still applying general sales tax.
Where both exemptions apply, the combined savings are substantial. Where only the sales tax is waived, the discount may only amount to 6% to 10% off the recreational price. To qualify, you need a current physician’s recommendation and a state-issued registry card, presented at the dispensary with government-issued photo ID. Annual registration fees typically run from about $25 to $125. If your card lapses, full recreational tax rates apply immediately.
Why Shelf Prices Are High Before Tax
Even before any tax is added at checkout, dispensary shelf prices are pushed up by a federal tax rule no other retail industry faces. Section 280E of the Internal Revenue Code blocks any business that deals in federally controlled substances from deducting ordinary operating expenses on its federal return.1Office of the Law Revision Counsel. 26 U.S. Code 280E – Expenditures in Connection With the Illegal Sale of Drugs A dispensary cannot write off rent, payroll, utilities, or marketing the way every other retailer does.2Congress.gov. The Application of Internal Revenue Code Section 280E to Marijuana Businesses – Selected Legal Issues
The effect is severe. Instead of paying federal income tax on actual profit after expenses, cannabis businesses pay on gross income (revenue minus only the cost of the product itself). Estimated effective federal tax rates for a dispensary under 280E run between 70% and 110%, compared to roughly 20% to 30% for a similar business in any other industry.2Congress.gov. The Application of Internal Revenue Code Section 280E to Marijuana Businesses – Selected Legal Issues That cost does not appear on your receipt. It is baked into the base price of every product on the shelf.
The 2026 Rescheduling and Medical Prices
On April 28, 2026, a final rule took effect moving certain marijuana products from Schedule I to Schedule III of the Controlled Substances Act. The rescheduling covers FDA-approved drug products containing marijuana and marijuana products sold under a qualifying state medical cannabis license.3Federal Register. Schedules of Controlled Substances – Rescheduling of Food and Drug Administration Approved Products Because 280E only applies to Schedule I and II substances, medical cannabis businesses are no longer blocked from deducting normal operating expenses starting in tax year 2026.4U.S. Department of the Treasury. Treasury, IRS Announce Process for Tax Guidance Following DOJ Final Order Over time, that should put downward pressure on medical shelf prices, though how quickly it reaches the counter depends on competition and state market conditions.
The rescheduling does not apply to recreational cannabis. Unlicensed bulk marijuana remains Schedule I, and dispensaries selling recreational products still operate under the full weight of 280E.5U.S. Department of Justice. Justice Department Places FDA-Approved Marijuana Products and Products Containing Marijuana Subject to State Medical Marijuana Licenses in Schedule III
Can You Deduct Dispensary Purchases on Your Tax Return?
For now, no. IRS Publication 502 states that amounts paid for controlled substances not legal under federal law cannot be included in the medical expense deduction.6Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses The 2026 rescheduling of medical cannabis to Schedule III may eventually change this, because Schedule III substances prescribed by a physician generally qualify as deductible medical care. The IRS has not yet updated Publication 502 or issued guidance, so claiming dispensary purchases as a medical deduction remains risky for the 2026 tax year.
One related expense does qualify: the cost of the physician consultation to obtain or renew a medical cannabis certification. That is a medical service, and the fee counts toward your medical expense deduction if you itemize and your total medical expenses exceed 7.5% of your adjusted gross income.
Payment Fees Are Not Tax, But They Show Up on the Total
Because cannabis remains federally illegal for recreational purposes, major credit card networks refuse dispensary transactions. Most dispensaries run cash-heavy. On-site ATMs typically charge $3 to $5 or more per withdrawal, and “point of banking” systems at the register add convenience fees of about $2 to $3.50 per transaction. These are not taxes and will not appear as tax on your receipt, but they add to what leaves your wallet. Bringing cash from your own bank avoids them.