A cannabis growing operation (L) that was constructed in March is seen next to Fiddlestix vineyards (R) in the Santa Ynez Valley northwest of Santa Barbara, California on August 6, 2019. – A bitter war has erupted between pot growers and vintners in
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Today alcohol is legal in the U.S. at the federal and state level. Cannabis is legal in some states but not yet at the federal level. Wherever they are legal, however, alcohol and cannabis provide considerable tax revenues.
Founded in 2014, Wikileaf, an online company serving cannabis consumers, lists more than 3,500 legal cannabis dispensaries, deliveries and brands across the U.S. and Canada, and it claims to serve over 1 million organic cannabis users monthly.
The company’s founder and CEO, Dan Nelson, says, “…we have dedicated a
Dan Nelson, CEO Wikileaf
Courtesy Wikileaf
significant amount of resources to ensuring that we have the most up-to-date research and data. While the majority of our business hinges on bringing transparency to cannabis pricing, sales taxes on cannabis are still quite significant and people want to know where their dollars are going…” He adds, “There is still a lot of negative stigma surrounding the industry…By highlighting how the cannabis industry spends its tax revenue compared to adjacent industries, we hope that we can open people’s eyes.”
To that end, Wikileaf released a paper titled, “Data for Alcohol vs. Cannabis: Which Taxes Help Society More?” The data was gleaned using reports and statistics in five legal recreational cannabis states: Alaska, California, Colorado, Oregon and Washington, each of which supports a robust beverage alcohol trade.
Wikileaf claims, “Cannabis and alcohol are taxed in similar ways across all five states…” The paper shows that each of the five states have legislated a cannabis-specific excise tax which is earmarked at least in part for crucial social services. The states also collect beverage alcohol excise taxes, and some states earmark that tax in part for social services.
The Five States
1. Alaska imposes no sales tax on either beverage alcohol or cannabis, but, generally, the wine and beer excise tax is $2.50/gallon; malt beverages and cider are $1.07/gallon; tax on most spirits is $12.80/gallon. Alcohol tax revenue in 2017 and 2018 hovered around $20 million.
Marijuana cultivation facilities in Alaska pay an excise tax of $50 per ounce. In 2017, the tax brought in just under $1 million in revenue; in 2018 the tax revenue exceeded $5 million.
Approximately 50% of alcohol and cannabis excise tax revenue in Alaska goes toward some sort of alcohol/drug education and treatment program, with an emphasis on youths.
2. California reaps 7.25% retail sales tax on alcohol; localities are free to add local sales tax to that. The excise tax on wine and beer is $1.24 for every 31-gallon barrel, and at a proportionate rate for any other quantity. Wine under 14% alcohol by volume pays an additional one-cent/gallon, which rises to two-cents for wine over 14%. Sparkling wine and distilled spirit excise taxes are much higher.
The state collected $368 million in taxes on alcohol in 2017; $376 million in 2018. The state puts its excise tax revenue into the Alcohol Beverage Control (ABC) Fund, to be used for general state services and to support the ABC Board that oversees liquor licensing. According to Wikileaf, in 2017-2018, a significant portion of the alcohol excise tax went for the ABC’s administration of alcohol controls.
California imposes an excise tax on cannabis cultivators based on the weight of leaves ($2.75/dry ounce) and of flowers ($9.25 dry ounce). In addition to the 7.25% retail sales tax, cannabis buyers pay another 15% in excise taxes collected by the retailer and paid to the state. In 2017, $345 million in taxes from cannabis was collected; in 2018 it was $288 million. The lion’s share of the money is used to fund a variety of drug/alcohol prevention and treatment programs, child care, environmental and public safety programs.
3. In 2017, Colorado collected $46 million in sales and excise taxes from beverage alcohol; and almost the same in 2018. About 85% of this revenue is allocated to the Old Age Pension Fund; the rest goes to the general fund.
Also in 2017, recreational cannabis brought Colorado over $99 million in sales and excise taxes; the take jumped to $236 million in 2018. Most revenue goes to the Building Excellent Schools Today Fund, the rest of the money goes into a general fund for education.
4. Oregon charges no sales tax and, since it is an alcohol control state, there’s no state excise tax on liquor sold at state stores. But there is an excise tax on beer and wine production: $0.67/gallon and $0.08/gallon respectively. Of the state’s approximate $250 million in alcohol excise tax revenue in each of the past two years, about half went into a general fund; about $90 million went to counties and cities and $9 million went into mental health alcohol and drug services.
The state imposes a 17% retail sales tax on cannabis consumers. Of the approximately $250 million in 2017 & 2018 cannabis excise tax revenue, about $50 million went to administration and distributions to cities and counties; about $200 million went to state school funding, mental health services, state police, and drug abuse prevention.
5. The excise tax on most wine in Washington is $0.80/gallon; beer is taxed at $0.26/gallon. A sales tax of 6.50% also applies. The distilled spirits excise tax is $14.2/gallon, and consumers are subject to a 20% retail sales tax on spirits, while businesses are charged an additional $9.24/gal and 13.7% sales tax. All alcohol tax revenues go into the Washington “Liquor Revolving Fund” (LRF); its allocation is subject to legislative discretion. LRF’s financial distribution of its nearly $191 million in alcohol tax revenue for 2018 was: general services, 58%; municipalities, 35%; alcohol education, abuse prevention and research, 07%.
In addition to a general sales tax, Washington imposes a 37% excise tax on cannabis. The tax revenue from cannabis in 2018 was almost $284 million, which all went into a dedicated “marijuana account.” The state dispenses lump sums to state agencies, schools, and research. 50% of remaining revenue goes to the state’s health plan trust account; 15% to programs that study, prevent, and educate the public about substance abuse among youth; 10% to broader education and campaigns about marijuana; 5% to community health centers that provide general health care; unallocated revenue goes to the general state fund and municipalities.
To summarize: Wikileaf’s paper appears to say that, in these five states overall, and by percentage, cannabis taxes provide slightly more support to social programs than taxes from beverage alcohol.