Minnesota cannabis tax hike proposed ahead of first sales

Adult-use marijuana sales have yet to launch in Minnesota, but state lawmakers are already proposing a tax hike.

A recently announced state budget agreement would raise the gross receipts tax from 10% on sales at licensed recreational cannabis businesses to 15%, according to Minneapolis TV station WCCO.

Minnesota legalized adult-use marijuana in 2023, but sales might not launch until next year.

In the meantime, lawmakers have a sizable projected budget deficit to close.

The tax increase would be on top of the state sales tax rate of 6.975% and any local sales taxes.

The tax also would apply to hemp-derived THC edibles such as the beverages sold at liquor stores and other non-cannabis retailers.

If approved, the increase would make Minnesota’s taxes higher than neighboring states that regulate adult-use sales.

Michigan imposes a 10% excise tax on retail sales, plus a 6% sales tax, though Michigan Gov. Gretchen Whitmer has proposed a sizable tax hike.

The tax structure in Illinois is more complicated.

That state imposes a 10% tax on retail sales of cannabis products with less than 35% THC and 25% on retail sales of products with THC concentrations greater than 35%.

Some cannabis advocates in Minnesota have expressed concern that a 15% surcharge would make legal cannabis too expensive and allow the illicit market to prosper.

“When we legalized adult-use cannabis, we talked about how this is not a cash cow,” Minnesota state Sen. Lindsey Port, one of the law’s authors, said during a committee hearing, according to WCCO.

“It’s not an answer to the state budget’s concerns.

“I’m frustrated to see it is being used in that way because it will not be successful.”