U.S. Cannabis Tax Revenue Tops $3 Billion In 2020

Cannabis legalization in the United States at the state level has been a smashing success by virtually every measure. With New York, Virginia, and New Mexico having passed legalization measures via legislative action in 2021, the number of legal states is now up to 18. Washington D.C. has also legalized.

Obviously, not every state has fully implemented its legalization reform measure that was passed by voters or lawmakers. However, several have, with Colorado being the first state to allow legal adult-use sales starting in 2014.

2020 was a banner year for cannabis tax revenues in the United States, with total revenue topping $3 billion. Below is more information about it from our friends at NORML via a recent news release:

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.”