Washington To Do Away With 37% Medical Cannabis Tax

Lawmakers in Washington State “recently passed a bill granting an exemption from the 37% excise tax for medical marijuana patients and designated providers,” according to Forbes.

The passage of the measure eliminates  what has been characterized as “one of the highest tax rates imposed on medical marijuana products.” 

The bill, HB 1453, was originally introduced last year. 

Per an official legislative summary of the proposal, the bill aimed to provide “a tax exemption from the 37 percent cannabis excise tax for qualifying patients and designated providers with a recognition card on purchases of cannabis products that are labeled as Department of Health (DOH) compliant product and tested in accordance with the DOH’s rules.”

“There is levied and collected a cannabis excise tax equal to 37 percent of the selling price on each retail sale in Washington of cannabis concentrates, useable cannabis, and cannabis-infused products. This tax is separate and in addition to general state and local sales and use taxes that apply to retail sales of tangible personal property, and is not part of the total retail price to which general state and local sales and use taxes apply,” the summary said. “The tax must be reflected in the price list or quoted shelf price in the licensed cannabis retail store and in any advertising that includes prices for all cannabis products. All revenues collected from the cannabis excise tax must be deposited each day in the Dedicated Cannabis Account.”

The summary continued: “A tax exemption is provided to qualifying patients and designated providers who hold a recognition card, from the 37 percent cannabis excise tax, on their purchases of cannabis products that are labeled as a Department of Health (DOH) compliant product and tested in accordance with the DOH’s rules. Each seller making exempt sales must maintain information establishing eligibility for the exemption in the form and manner required by the Washington State Liquor and Cannabis Board (LCB). The LCB must provide a separate tax reporting line on the excise tax form for exemption amounts claimed.”

The Seattle law firm Harris Sliwoski provided more background on the measure and its journey through the Washington legislature, noting that the 37 percent tax imposed an unnecessary burden on patients.

“On March 6, 2024, the Washington Senate passed HB 1453 which will provide an exemption from the 37% excise tax for medical cannabis patients and designated providers. The bill now waits for signatures and executive action to become law. First introduced in 2023, HB 1453 sought to harmonize the existing medical exemptions from general sales and use taxes with the 37% excise tax on cannabis sales,” the law firm explained. “Medical cannabis patients and providers face a significant financial burden when patients and providers are unfairly taxed the same as recreational consumers. Primarily, medical cannabis is not recreational or a luxury, but a necessity for many people who suffer from chronic pain, epilepsy, PTSD, and other conditions. Medical cannabis is often the only effective treatment that allows them to function and improve their quality of life. Medical cannabis patients and providers must already jump through additional regulatory hoops to stay compliant with the LCB and the DOH and the imposition of additional taxes only exacerbates this hardship. Medical cannabis patients and providers follow strict rules and guidelines to access the medicine not required by recreational cannabis users and providers, and it is unjust to further penalize those medical patients and providers.”

As the firm pointed out, the 37% tax was all the more onerous given that medical cannabis is both “already expensive and not covered by insurance or public health programs.”

“Adding a tax aimed at recreational sales on top of that makes it even more unaffordable for many patients who are already struggling financially. This can force them to reduce their dosage, switch to cheaper but less effective products, or even turn to the recreational market which does not have the same DOH requirements and compliance standards,” the firm said. “Taxing medical cannabis patients the same as recreational consumers is a form of discrimination that harms their health and well-being. It also goes against the principle of harm reduction, which is one basis of medical cannabis legalization policy.”

The bill will now head to the desk of Democratic Gov. Jay Inslee. If he adds his signature, the bill “will take effect ninety (90) days after the adjournment of the current legislative session and will provide medical cannabis patients and providers a much-needed tax exemption for their medicine,” Harris Sliwoski said.

“Washington lawmakers have finally acknowledged that medical cannabis should be treated as a medicine, not a commodity, and exempted from the 37% excise tax along with the current exemption from general and local sales and use taxes,” the firm added.