Following the approval of Issue 2 in November 2023, Ohio legalized the sale and possession of non-medical (recreational) cannabis for adults aged 21 and over. A key component of this legislation is the imposition of a 10% excise tax on cannabis sales, in addition to the state’s standard sales tax. This article explores the implications of this tax, its current status as of March 10, 2025, and its impact on Ohio’s revenue landscape.
Understanding the 10% Excise Tax
The 10% excise tax is levied on the sale of adult-use cannabis by dispensaries to consumers. Similar to the sales tax, it is imposed on the consumer at the time of sale and collected by the dispensary. Dispensaries are responsible for remitting this tax to the Ohio Department of Taxation, with returns and payments due electronically by the 23rd of each month following the month in which sales occurred.
In addition to the excise tax, cannabis sales are subject to Ohio’s state sales tax of 5.75%, along with any applicable local sales taxes, which can range between 0% and 2.25%. This brings the total tax rate on non-medical cannabis purchases to between 15.75% and 17.25%, depending on the locality.
Revenue Collection and Distribution
As of March 10, 2025, Ohio has collected approximately $37.6 million from the 10% marijuana excise tax. This figure underscores the significant contribution of cannabis sales to the state’s revenue within a relatively short period.
The revenue generated from this excise tax is allocated as follows:
- 36% to the Cannabis Social Equity and Jobs Fund: This fund supports social equity programs and job initiatives within the cannabis industry.
- 36% to the Host Community Cannabis Fund: This allocation benefits municipal corporations or townships that host adult-use dispensaries, providing them with additional resources to manage the impact of cannabis businesses in their communities.
- 25% to the Substance Abuse and Addiction Fund: Funds are directed towards substance abuse and addiction services, aiming to mitigate potential negative impacts associated with increased cannabis accessibility.
- 3% to the Division of Cannabis Control and Tax Commissioner Fund: This portion supports the operations of the Division of Cannabis Control and covers tax administration costs.
Implications for Ohio’s Revenue
The implementation of the 10% excise tax on non-medical cannabis has opened a new revenue stream for Ohio. Projections indicate that the state could generate between $90 million and $115 million in tax revenue annually if current sales trends continue. These funds are earmarked for specific programs and communities, ensuring that the benefits of cannabis legalization are distributed across various sectors.
However, discussions are ongoing regarding potential changes to the tax structure and revenue allocation. Governor Mike DeWine has proposed adjustments that would increase the excise tax rate and redirect revenue distribution. Specifically, the proposal suggests raising the excise tax and allocating all tax revenue to the state’s general revenue fund, which could impact the funds currently designated for social equity, host communities, and substance abuse programs. These proposed changes have met with opposition from local governments and stakeholders who are concerned about deviating from the voter-approved allocation plan.
A Look Forward
The 10% excise tax on non-medical cannabis sales in Ohio represents a significant policy shift with substantial fiscal implications. As of March 2025, the tax has generated considerable revenue, supporting various state and community programs. While the current tax structure aims to balance the benefits of legalization with public health and social equity considerations, ongoing legislative discussions may lead to adjustments in tax rates and revenue distribution. Stakeholders and citizens alike should stay informed about these developments to understand how they may impact the state’s fiscal landscape and community investments.