The Economy Of Cannabis Industry

FAS CPA & Consultants

Federal cannabis legislation will be a game changer. Interstate trade in cannabis will lift prices for retailers and growers. It will also level the playing field for cannabis entrepreneurs by lifting current restrictions on banking and tax deductions. As a result, billions of dollars in capital will flow into the market.

  • Data for the cannabis economy is largely unavailable. No national repository exists, and it is hard to compare data collected by different states. Furthermore, the metamorphosis from a medical to a recreational market distorts the data.
  • By March 2022, states reported combined tax revenue of $11.2 billion from adult-use recreational cannabis sales.
  • The above figure includes revenue of $3.7 billion for 2021.
  • California collects the most revenue. California recently capped excise duties and eliminated the additional grower’s tax.
  • Revenue is determined by the rates and the size of the state.
  • High rates have been seen to hamper the growth of the legal industry.
  • Nineteen US states and the District of Columbia legalized recreational cannabis use.

Focus on Florida

The medical cannabis market for the Sunshine State is one of the largest in the US, topping annual revenues of $1 billion.

A new ballot initiative wants to amend the Florida Constitution to allow medical cannabis dispensaries to sell recreational cannabis. Trulieve supports the measure.

  • Trulieve is the state’s largest medical supplier, operating 119 dispensaries.
  • The measure would not allow individuals to grow their cannabis.
  • Detractors say the measure will unfairly advantage existing dispensaries like Trulieve.
  • In August, the measure received approval to gather signatures.
  • To make it to the ballot by February 2024, the organizers must collect 900,000 signatures.

Cannabis taxation:  Florida has no cannabis-specific taxes on the books. A general six percent state sales tax applies to cannabis retail sales.

Cannabis on A State-By-State Basis

State Recreational Sales Regulation Comments
Alaska October 2016    
Arizona January 2021 State operates a limited license market. Dispensaries can operate multiple cultivation or production sites. The industry spawned growth in the Cannabis Law Practise industry. 
Most of the 130-plus medical and recreational cannabis licenses have been issued in Maricopa County. Arizona’s Harvest Health & Recreation has been bought by Florida-based Trulieve Cannabis for $2 billion.
This year, licenses for rural markets and minority or disadvantaged operators will be issued.  
California January 2018 The 2016 recreational sales program merger with the twenty-year-old medical cannabis program is underway. The limit of fewer than 1,000 licensed dispensaries hampered market growth and allowed illegal dealers to flourish.
It is up to local governments to decide whether cannabis can be sold in their jurisdiction. Many local governments decided not to allow recreational cannabis sales.
California Governor Gavin Newsom signed legislation to expand the legal market. In addition, the legislation creates a process for future interstate sales and prohibits employment discrimination against cannabis use outside of the workplace.
State tax collections already exceed $5 billion.
Colorado January 2014 Colorado was the first state to legalize cannabis for recreational use by adults.  Local government in Denver turned toward social equity in the cannabis market.
Sales rose from $700 million to $2.2 billion in 2020. The aim is to nullify past enforcement efforts.
Sales declined after June 2021. As a result, hospitality and delivery licenses are exclusively issued to marginalized communities and families with a history of marijuana-related arrest and incarceration records. 
Tax revenue gets earmarked mainly for new school construction. Homegrown dispensaries and brands are negatively affected by the trend toward consolidation based on the expectation that federal legislation will soon change the market.
Connecticut Unannounced   Cannabis for recreational use has been legalized, and sales will start soon
Illinois January 2020 After seven years of medical cannabis sales, Illinois took the plunge and legalized adult recreational cannabis use. An act of state proclaimed the legislation. It was the first time cannabis was not legalized by a voter initiative. 
Up $500 million, and sales for recreational use reached $1.5 billion in 2022, while medical cannabis achieved sales of $300 million. One-third of the tax income is distributed as grants.
For 2022, the state’s year-to-year tax income will increase by 50 percent to $445 million. Grants help under-served communities with gun violence, child poverty, unemployment, and imprisonment.
Maine October 2020  


Massachusetts November 2018 Voters approved recreational cannabis use for adults in 2016. Discussions of equity, safety, and effectiveness took two years to complete.
  In November 2018, the first dispensaries opened for business. The first locations were in Leicester and Northampton.
  Delivery services were approved in 2021. Licenses were only granted to communities disproportionately disadvantaged by the ‘war on drugs.’
  In August 2022, Governor Baker signed a bill allowing the social consumption of cannabis. Social Consumption:  Cannabis use on the premises where the cannabis was purchased.
  On September 1, 2022, the Cannabis Control Commission celebrated the achievement of building a billion-dollar-a-year industry from scratch. 
Michigan December 2019    
Minnesota The medical use of cannabis was legalized in 2014. A strong lobby wants the law to be rolled back.
Recreational use of cannabis is against the law. Some cities elected to enact bans on selling edibles containing hemp-based THC.
In July 2022, the sale of edibles containing limited amounts of hemp-based THC was legalized. One city is working on parameters around the sale of these legal edibles.
The law set THC limits and regulated who would be allowed to sell the product and how much could be sold per client. Supporters of the new law see it as a gateway to eventually selling recreational cannabis to adults.
Missouri A ballot to approve the sales of recreational cannabis to adults will be decided upon on November 8, 2022. Legal Missouri leading the campaign, estimates annual state revenue of $41 million based on a cannabis sales tax of six percent and an additional three percent tax for local governments that would generate another $13.8 million.
Medical sales began in October 2020. The ballot also asks for expunging nonviolent marijuana offenses.
Cumulatively, medical cannabis achieved revenue of $470 million from 200 dispensaries.  Sales average approximately $30 million per month.
Montana January 2022  
Nevada June 2017    
New Jersey April 2022    
New Mexico April 2022 Within five months after the market opened, regulators issued more than 1,000 licenses. These enterprises, including 476 dispensaries, compete with 35 vertically integrated legacy operators in the medical program started in 2007.
It is estimated that six of the legacy operators control fifty percent of the recreational retail market. The plant-per-facility limit is blamed for prices that exceed those of other Western States.
Sales failed to achieve the expected level of $300 million for the first year. Eleven New Mexico communities close to the Texas border are responsible for approximately 30 percent of all recreational cannabis sales.
A limit of 20,000 plants per facility limits production growth.
New York Unannounced   Cannabis for recreational use has been legalized, and sales will start soon
Oregon October 2015 After 16 years of legalized medical use, voters approved recreational use for adults in November 2014 The market is competitive, and the boon to consumers resulted in the rise of several national cannabis brands.
  Lawmakers hoped to convert criminal growers and sellers into rule-abiding, tax-compliant entrepreneurs.  Price and profit pressure caused consolidations, and some feared that products would shift toward the illegal markets.
  An unlimited number of licenses became available at modest tax rates became available. The market eagerly anticipates the end of restrictions on interstate sales of cannabis.
  A new licensing moratorium aims at the protection of incumbent enterprises.  
Rhode Island Unannounced   Cannabis for recreational use has been legalized, and sales will start soon
Vermont October 2022    
Virginia Unannounced   Cannabis for recreational use has been legalized, and sales will start soon
Washington July 2014 The recreational use market grew from $388 billion in 2015 to $1.5 billion in 2021. Competition in the market has become highly evolved.
The tax rate for cannabis retail in Washington state is the highest in the US at 37 percent. The laws regulating cannabis retail sales have remained static.
Ownership is limited based on residency, industry subsector, scarcity of licenses, and a five-store cap for retail enterprises. These regulations compound the banking challenges and limit venture capital and merger & acquisition supply. 
These limitations drove some retail chains to expand with new branches outside Washington State. Within two years, more than 70 percent of sales moved to the legal market.
Revenue surpassed alcohol tax collections as it exceeded $500 million per year.
Washington DC Unannounced  


Cannabis for recreational use has been legalized, and sales will start soon

Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intends for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services.  This article cannot serve as a substitute for such professional services or advice.  Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation.  This article is subject to change at any time and for any reason.

Check Our Tax Planning For U.S. Cannabis Investors

We Are Just A Message Away From You. Get A Consultation

Accounting Firm providing Accounting Advisory, Tax Planning and Offshore Strategies to grow your business and protect your assets. 

Clients Feedback

Our Clients Reviews

Fulton is a wonderful CPA who fully understands tax law and provides honest advice for his clients.

    Al Kusner
    Al Kusner


    Thanks to FAS & CPA Consultants and Fulton Abraham Sanchez, CPA, I was able to resolve a debt of $479,677.71 that I had with the IRS.

      Gala Cedeño
      Gala Cedeño


      My experience with FAS CPA & Consultants has been incredible, their professionalism is impeccable. I highly recommend them.

        Carlos Lange
        Carlos Lange


        I highly recommend FAS CPA & Consultants, they are responsible, efficient and very dedicated.                                        

          David Barcelo
          David Barcelo


          Leave a Reply

          This site uses Akismet to reduce spam. Learn how your comment data is processed.

          error: Content is protected !!