Minnesota Budget Deal Includes Cannabis Tax Hike, New Medical Licenses
Minnesota state lawmakers have finalized an agreement on the state budget, a deal that includes a significant adjustment to the cannabis excise tax, along with plans to expand the state’s medical cannabis program. The budget’s provisions reflect a continued evolution of Minnesota’s approach to regulated cannabis and hemp markets.
Tax Rate Increase
A central element of the budget agreement is the decision to raise the cannabis excise tax. The tax on both marijuana and hemp products will be increased from the current rate of 10% to 15%. This change places Minnesota among the states with the highest tax rates on cannabis sales. The move is projected to generate additional revenue for the state, though the exact financial impact will depend on market factors, including consumer behavior and the overall health of the cannabis industry.
This increase will elevate Minnesota to the fourth-highest state tax rate on marijuana sales nationwide. The state will also boast the highest tax rate on retail hemp product sales among regulated hemp markets. This makes Minnesota’s approach to cannabis taxation more aggressive than many of its counterparts, positioning the state at the forefront of jurisdictions seeking to maximize revenue from the burgeoning cannabis sector. This could influence both consumer behavior and the strategic decisions of businesses operating within the state’s cannabis industry.
Comparative Analysis: Other States’ Approaches
It’s worth noting how other states are handling cannabis taxation. California, for example, recently increased its cannabis excise tax, boosting it from 15% to 19%. This indicates a trend among states with established cannabis markets to refine their taxation strategies, balancing revenue goals with the economic realities of the industry. Additionally, Maine is also adjusting its cannabis excise tax, although its approach differs. Maine is increasing its tax from 10% to 14%. Maine is also reducing cultivation taxes beginning January 1, 2026, suggesting an attempt to encourage growth within the cultivation sector while still securing revenue. These comparative examples demonstrate the diverse approaches states are taking to manage this evolving industry.
Expansion of Medical Cannabis Licenses
Beyond the tax adjustments, the budget agreement includes provisions for expanding access to medical cannabis. The state’s Department of Public Safety is slated to begin issuing nine new vertically integrated medical cannabis licenses by December 1, 2025. An additional three licenses are scheduled to be issued by April 1, 2026. This initiative aims to broaden the scope of the medical cannabis program, potentially increasing patient access and fostering competition within the medical cannabis market. This expansion is a key step toward refining the state’s cannabis policies.
Looking Ahead
The budget deal represents a significant step in shaping Minnesota’s cannabis landscape. The tax increase, coupled with the expansion of medical cannabis licenses, reflects a balancing act between maximizing revenue, regulating the industry, and ensuring access to medical cannabis for patients. Stakeholders will be closely monitoring the effects of these policy changes, from consumers and businesses to policymakers. The market will continue to evolve in response to these new measures, and the full impact will become clearer over the coming months and years.
The adjustments to the tax rate and the planned expansion of medical licenses reflect a broader effort to adapt to the evolving realities of the cannabis and hemp industries. The decisions will have notable effects on the industry, its consumers, and its ability to contribute to the state’s economy. As the state continues to refine its approach, the adjustments outlined in the budget agreement will shape the landscape for years to come.
