Minnesota cannabis legalization has been in the works since Governor Tim Walz signed House File 100 over two years ago. Since then, Indigenous tribes have opened stores on and off the reservation while other license holders await that first sale.
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The state has not followed any rubric for legalization set by already legal locales. Minn. is clearly building a distinctive weed space. While the brewery-fueled THC beverage space and tribal dispensaries hit a stride, a freshly passed bill could hamper the success of the remaining adult-use space.
Minnesota cannabis tax bill heads to final steps
A tax bill that touches most aspects of state income passed its final reading in the Minn. H0use on Monday, and the yet-to-launch cannabis space took a tax-related hit. Not all lawmakers agree with the move, but it is now the Governor’s decision.
The bill was kicked back to the House for final approval on Senate ammendments, which it received early this week. Now, SSHF9 will move on to the Governor for finalization. As the bill is written now, it will bring the gross cannabis tax up from 10 percent to 15 percent. The former rate matched neighboring adult-use states. The gross cannabis tax in Michigan is 10 percent, Missouri is set at nine percent, and Illinois is set at seven percent.
The proposed hike in Minnesota would make it the highest rate in the Midwest according to the Tax Foundation, matching those of California, Colorado, and Nevada. Washington (37 percent), Arizona (16 percent), and Montana (20 percent) still maintain the top three highest cannabis tax rates in the U.S. And these rates are only the beginning. Cities and localities can add municipal tax on top of the gross percentage set by the state.
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High taxation may impact legalization success
SSHF9 hopes to achieve $118M in increased state revenue in the next biennium, with the cannabis tax providing a portion of that goal. Unfortunately, high taxation might deter customers from switching from the legacy market to the regulated one.
“The increase in the cannabis tax is not a good idea for a market that’s just getting started,” Representative Nolan West agreed in a House press release.
Taxation is one of the most resounding complaints of cannabis operators. In states like Washington, where adult use has been legalized for almost a decade at a tax rate that reaches 45 percent in some cities, the legal market is still fighting the legacy one for market share. It may behoove states just getting started to let the industry get off its feet before taxing it to death.
The bill has yet to become law. So, perhaps fair-priced weed still stands a chance.
