BALTIMORE — Maryland's cannabis tax is increasing from 9 percent to 12 percent starting Tuesday, July 1, which also marks two years since dispensaries began selling adult-use cannabis in 2023.
WATCH: Cannabis tax in Maryland gets higher, rising to 12 percent on July 1
State lawmakers decided on the tax hike a few months ago during a challenging budget season, which also saw the state raise overall taxes and fees by about $1.6 billion, along with another $1.5 billion in spending cuts.
The tax hike has created concerns among vendors about potential impacts, both on customers and the legal cannabis market.
"We want to be careful to protect this great market here in Maryland, especially since we've invested so much into it," said Connor Whelton, co-founder of ReLeaf Shop in Mount Vernon.
Whelton, who also serves on the Dispensary Association's policy committee, expressed apprehension about the tax increase.
"I'm not sure there's going to be many people in this market who say it's going to be a great thing for the market. I think it does create more challenges. Are these goals insurmountable? I wouldn't say so, but it's already such a challenging market. It's just another challenge added to it," Whelton told WMAR-2 News.
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The prospect of the tax increase, which arose last winter during state budget negotiations, created unease within the industry. A primary concern: competition with the unregulated market, and what some dispensary owners believe is a lack of enforcement against it.
"You have some frustration when your regulated industry has taxes going up, while there's seemingly no action on a completely illicit market that you're competing with," Whelton said.
There are also worries that some customers might return to illegal sources.
"There's a chance that there's going to be some migration from the regulated market to the unregulated market, and I think this will be challenging for this wave of social equity licenses that are looking to get a foothold in this regulated market," Whelton said.
While Whelton understands the state's decision to raise cannabis taxes, he cautions against relying too heavily on cannabis revenue.
"The state of Maryland has one of the lowest tax rates in the country. It's very true, but it's also one of the top five cannabis markets in the country," Whelton explained. "So when they look to other markets that have higher tax rates and think they have room to go up, they might be correct in that they can go up, but some of these markets that have much higher tax rates are collapsing."
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The tax increase takes effect Tuesday, with the 3 percent increase going to the state's general fund.
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