Cannabis tax revenue in Massachusetts is performing better than projected, over four years into the state’s adult-use market. According to the most recently available data, Massachusetts reported collecting $74.2 million in marijuana excise taxes—much more than the $51.3 million in alcohol excise taxes that were collected.
Alcohol sales continue the downward trend that began two decades ago, according to data collected by Gallup polling, despite a temporary sharp uptick in alcohol sales amid COVID. Analysts have wondered if there is a correlation between cannabis reform and alcohol sales.
The trends seen in Massachusetts are no different. Fortune reports that alcohol excise taxes imposed on each gallon of alcohol produced also remained flat over the last five years, at $0.55 per gallon of wine, and $4.05 per gallon of hard alcohol.
Massachusetts collected over $112 million in adult-use cannabis sales excise tax revenue in 2021—206 percent higher than projected—according to a Monthly Public Meeting presentation from data from the state’s Cannabis Control Commission.
“This number also underscores the entire agency’s tireless efforts, particularly those of our hardworking staff, to thoughtfully regulate a safe, accessible, and effective adult-use marketplace that keeps critical tenets of our mission—public health, public safety, and equity, among others—front of mind,” Commission Executive Director Shawn Collins said in a statement on January 25.
The state charges an excise tax of 10.75 percent on the projected retail price of recreational cannabis in addition to a 6.25 percent state sales tax, plus a local tax of up to three percent.
Cannabis sales are doing much better than anticipated, despite all of the hiccups along the way such as COVID. But analysts say the surge in cannabis sales in Massachusetts comes at no surprise.
Vivien Azer, a Wall Street research analyst and managing director at Cowen who covers the emerging cannabis sector told local news station WCBV that when states convert from medical cannabis to adult-use, it typically leads to a doubling or even tripling of revenues “almost overnight.”
Kicking off recreational cannabis sales in any state is something of a spectacle to be celebrated.
Mikayla Bell, community outreach manager for NETA, one of the largest cannabis retailers in the state. “I think that people are looking for an alternative to make them feel better,” Bell told WCBV. “Oftentimes people are turning to alcohol for relief. And now they found another product with without the hangover, without the calories.”
Cannabis sales in Massachusetts high a milestone last September when sales in the state eclipsed $2 billion.
During the first year of cannabis sales, from November 2018 through 2019, 33 cannabis retailers generated $393.7 million in gross sales. Sales for all of the 2019 calendar year reached $444.9 million.
In 2020, 91 adult-use cannabis retailers tallied $702 million in gross sales, despite being closed for two months due to the pandemic.
Most states impose a relatively high excise tax rate on cannabis. California’s cannabis tax hike didn’t go over well with legacy growers, for instance. But cannabis isn’t the only industry that faces steep taxes.
Alcohol taxes in Massachusetts could soon see a hike as well. State Representative Kay Khan filed a bill to double the excise taxes on beer, wine and liquor with H 2973. The state spends $2.6 billion each year to combat alcoholism and addiction, and should consider making the industry pay for that themselves.