How Cannabis Taxes Work in Oregon
In Oregon, both the retail and wholesale sale of cannabis products are subject to taxes. Here’s how the tax system works:
State tax on retail sales
There is a 17% state tax on the retail sale of cannabis products. Oregon state cannabis taxes apply to the final sale price paid by the consumer, including any local taxes.
Local tax on retail sales
Some cities and counties in Oregon may also levy a local tax on the retail sale of cannabis products. This tax is usually 3% or less.
Tax on wholesale transactions
There is also a tax on wholesale transactions between cannabis businesses. Wholesale transactions are subject to taxation of $1.26 per gram of flower, $0.50 per gram of leaves, and $0.70 per gram of immature plants.
Medical cannabis
Medical cannabis patients in Oregon are exempt from the state’s retail sales tax. They are still subject to the wholesale tax. Medical dispensaries also have different tax rates than retail dispensaries.
Tax collection
All cannabis businesses in Oregon must register with the Oregon Department of Revenue. Cannabis businesses collect and remit the appropriate taxes on a monthly basis.
The revenue generated from cannabis taxes in Oregon goes to fund a variety of programs and services. This includes education, drug treatment and prevention, law enforcement, and public health.
How is the tax rate on cannabis determined in Oregon?
In Oregon, taxes depend on the type of product and whether it’s sold at the retail or wholesale level.
Cannabis is subject to a 17% state sales tax. Additionally there may be a local tax of up to 3%.
At the wholesale level, cannabis is subject to a 17% state tax. which is based on the average market price of the product. This tax is paid by the producer or distributor, who may pass some or all the cost on to the retailer.
These tax rates are determined by the Oregon Liquor Control Commission, which oversees the state’s cannabis industry. The Commission may adjust tax rates periodically based on market conditions and other factors.
Can the tax rate change?
Yes, the tax rates on cannabis in Oregon can change. The Oregon Liquor Control Commission has the authority to adjust the tax rates based on market conditions, changes in the cost of production, or other factors that may affect the industry.
In 2020 the Commission reduced the wholesale tax rate from 17% to 17 cents per gram for cannabis flower. Additionally they lowered cannabis extracts from 10% to 1 cent per milligram. This temporary reduction provided some relief to cannabis businesses affected by the COVID-19 pandemic.
Additionally, local governments in Oregon have the option to levy an extra tax of up to 3% on cannabis sales. If a local government chooses to impose a tax, they may adjust the rate as needed.
The tax rates on cannabis in Oregon may be subject to change over time, depending on various factors that impact the industry.
Impacts of Cannabis Taxes in Oregon
In Oregon, the taxation of cannabis has a significant impact on the state’s economy and the cannabis industry. Here are a few ways that cannabis taxes are affecting Oregon:
Revenue Generation
Cannabis taxes are a significant source of revenue for the state of Oregon. The taxes collected from the sale of cannabis products fund various state programs and initiatives, including education, health care, and public safety. As the cannabis industry continues to grow, so does the amount of tax revenue generated.
Price Stability
Cannabis taxes are also having an impact on the price of cannabis products in Oregon. Higher taxes can result in higher prices for consumers, which can make it more difficult for some people to access the products they need. At the same time, the taxes help to regulate the market and prevent price instability, which can be beneficial for both consumers and businesses.
Competition
The taxation of cannabis in Oregon is also affecting competition within the industry. Higher taxes can make it more difficult for smaller, independent businesses to compete with larger, established companies. This can lead to a consolidation of the industry, which can have negative consequences for consumers and small businesses.
Black Market
Finally, cannabis taxes can also have an impact on the black market for cannabis in Oregon. High taxes can make it more difficult for consumers to access legal cannabis products, which can drive them to seek out products from the black market. This can be detrimental to the state’s economy and public health, as black market products are not regulated or tested for safety.
How are these taxes used?
In Oregon, revenue from cannabis taxes go to several different funds and programs, including the following:
The Common School Fund
40% of cannabis tax revenue goes to the Common School Fund, which supports K-12 public schools in the state. The money goes to to school districts based on enrollment.
Mental Health, Alcoholism, and Drug Services Account
20% of cannabis tax revenue goes to this account. This supports mental health, alcohol and drug abuse prevention and treatment, and related services.
State Police Account
15% of cannabis tax revenue goes to the State Police Account. This funds the state police’s efforts to regulate and enforce the cannabis industry.
Local Government Distributions
10% of cannabis tax revenue goes to cities and counties based on their percentage of licensed cannabis businesses.
Oregon Health Authority Account
5% of cannabis tax revenue goes to the Oregon Health Authority Account. This funds research, education, and other programs related to public health and cannabis.
Statewide Behavioral Health Services
5% of cannabis tax revenue goes to the Statewide Behavioral Health Services account. This provides support for community mental health programs and crisis intervention services.
Oregon Liquor Control Commission
5% of cannabis tax revenue goes to the Oregon Liquor Control Commission. This regulates and enforces the state’s cannabis laws and oversees the licensing of cannabis businesses.
It’s worth noting that these percentages may change the over time. Specific allocation of cannabis tax revenue may vary based on the state’s changing needs and priorities.
Revenue
Since the legalization of cannabis in Oregon in 2015, the state has collected a significant amount of revenue from cannabis taxes. According to the Oregon Department of Revenue, the total amounts of cannabis tax revenue collected by the state in recent years are:
- In the 2016-2017 fiscal year, the state collected $60.2 million in cannabis tax revenue.
- In the 2017-2018 fiscal year, the state collected $82 million in cannabis tax revenue.
- In the 2018-2019 fiscal year, the state collected $102.4 million in cannabis tax revenue.
- In the 2019-2020 fiscal year, the state collected $133.8 million in cannabis tax revenue.
It’s worth noting that the amount of revenue collected from cannabis taxes in Oregon has increased since legalization.
In conclusion, the taxation of cannabis in Oregon is having a significant impact on the state’s economy and the cannabis industry. While higher taxes can generate revenue and regulate the market, they can also create challenges for consumers, businesses, and the state’s efforts to end the black market. The state will need to consider the trade-offs involved in taxing cannabis and find a balance that benefits everyone.
What has cannabis tax revenue funded?
Here are some specific examples of projects and initiatives funded by cannabis tax revenue in Oregon:
Education:
- The Oregon Health Authority has funded a campaign to educate youth and adults about the risks of cannabis use. This includes the effects on the developing brain and the dangers of driving while under the influence of cannabis.
- The OLCC has partnered with the Oregon Department of Education to provide training and resources to teachers and school administrators on cannabis and its effects.
Law enforcement:
- The OLCC uses cannabis tax revenue to fund investigations and enforcement actions against illicit cannabis operations in the state.
- The Oregon State Police have received funding to buy equipment and technology to detect impaired driving, including drug recognition experts and breath testing devices.
Mental health and addiction services:
- The Oregon Health Authority has used cannabis tax revenue to support community-based mental health and substance abuse treatment programs.
- The OLCC has partnered with the Oregon Health Authority to provide grants to local health departments and community organizations to support substance abuse prevention and treatment.
Economic development:
- The City of Portland has used cannabis tax revenue to create a grant program to support small businesses in the cannabis industry, including dispensaries, processors, and cultivators.
- The Oregon Department of Agriculture has received funding to support research on hemp and the development of new hemp-based products.
Health care:
- The Oregon Health Authority has used cannabis tax revenue to fund the Oregon Medical Marijuana Program, which provides access to medical cannabis for qualifying patients.
- The OLCC has partnered with the Oregon Health Authority to provide funding for research on the effects of cannabis on health and wellness.
Negative effects of tax rates
Higher prices
The taxes on cannabis have contributed to higher prices for consumers. This can make legal cannabis less affordable than black market cannabis. This may encourage some consumers to continue to buy cannabis through illegal channels.
Impact on small businesses
Higher taxes can affect smaller cannabis businesses. Small businesses may struggle to compete with larger, more established companies that can absorb the costs. This can create a barrier to entry for new businesses and limit competition within the industry.
Reduced revenue for the state
In some cases, high taxes on cannabis can actually result in reduced revenue for the state. If the taxes make legal cannabis too expensive, it can encourage consumers to turn to the black market instead, which means the state misses out on potential tax revenue.
Stigmatization of cannabis
High tax rates on cannabis can also contribute to the stigmatization of cannabis use. Some people may view the high taxes as a way of penalizing or punishing cannabis users, which can reinforce negative stereotypes about cannabis and its users.
While the taxes on cannabis have provided significant revenue for the state of Oregon, it is important to consider the potential negative effects. Minimizing negative effects is essential to create a sustainable and fair cannabis industry.
Oregon’s Tax Rates vs Other Legal States
The tax rates on cannabis vary widely among the states where it is legal. Here is an overview of the tax rates in some of the most populous legal states:
California
Cannabis is subject to a 15% excise tax at the retail level, as well as a cultivation tax of $9.25 per ounce of flowers and $2.75 per ounce of leaves. Some cities and counties in California also impose extra taxes on cannabis.
Colorado
Cannabis is subject to a 15% tax at the wholesale level, and 15% sales tax at the retail level. Local governments in Colorado may also impose extra taxes on cannabis.
Illinois
Cannabis is subject to a 7% gross receipts tax at the retail level, besides state and local sales taxes. The state also imposes a cultivation tax of $7 per ounce of flowers and $1 per ounce of leaves.
Massachusetts
Cannabis is subject to a 10.75% excise tax at the retail level, as well as state and local sales taxes. Cities and towns in Massachusetts may also impose extra taxes on cannabis.
Michigan
Cannabis is subject to a 10% excise tax at the retail level, besides state and local sales taxes. The state also imposes a 6% sales tax on cannabis.
Nevada
Cannabis is subject to a 15% tax at the wholesale level, and 10% sales tax at the retail level. Local governments in Nevada may also impose extra taxes on cannabis.
It’s worth noting that the tax rates and structure can vary between states. These rates may change over time as the industry evolves and states adjust their policies.
How you can make a difference in Oregon
If someone wants to get involved with Oregon’s cannabis tax rate, there are several ways they can do so:
Contact your local legislators
The best way to make your voice heard is to contact your local legislators. You can find your state senator and representative on the Oregon State Legislature website. Send them an email or call their office to express your opinions on the cannabis tax rate.
Attend legislative hearings
You can attend legislative hearings on the cannabis tax rate to learn more about the issue and express your opinions. You can find information about upcoming hearings on the Oregon State Legislature website.
Join advocacy groups
There are several advocacy groups in Oregon that work on cannabis related issues. Joining these groups can provide opportunities to stay informed about legislative developments. Some examples of advocacy groups include Oregon NORML, the Oregon Cannabis Association, and the Oregon Retailers of Cannabis Association.
You can find more information about these groups on our blog about the pioneers of modern cannabis here.
Submit written testimony
You can submit written testimony to the Oregon State Legislature on the cannabis tax rate. The Oregon State Legislature website provides instructions on how to submit written testimony. This includes deadlines and guidelines for formatting and content.
By getting involved and making your voice heard, you can help shape Oregon’s cannabis tax rate. Together we can ensure that it reflects the needs and interests of the community.
If you’re interested in more information on how to make a difference, we strongly encourage you to read our blog about the Oregon cannabis equity act here.
You can sign the petition here.
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