Late Tuesday night, lawmakers sneaked in a surprise move—just as Minnesota was gearing up to let dispensaries open their doors—but they quietly cranked the cannabis tax from a chill 10% to a steeper 15%. Suddenly, Minnesota shot from one of the lowest cannabis taxes around to among the priciest in the country.
This wasn’t just a small tweak—it’s a 50% tax hike. Even more eye-opening? The state ditched the part of the law guaranteeing that 20% of cannabis tax revenue goes to local towns and cities. That means cities will have to foot any necessary bills for regulation and enforcement themselves.
Why the tax jump? A budget crisis is looming—Minnesota analysts say this bump could bring in an extra $200 million over the next four years. It’s part of a compromise between Governor Walz and legislative leaders as they scramble to avoid a big fiscal hole.
But here’s the twist: many legal and advocacy voices are warning this move could backfire. Senator Lindsey Port—who helped legalize adult-use cannabis—says pushing taxes higher before the legal market even starts “will encourage consumers to continue to buy from the illicit market”. A local cannabis consultant agrees, calling the hike “a gift to the unregulated market” and a blow to the little guys who did things above board.
Already, states like California have shown us that hefty taxes just drive people to stick with the black market—even years after legalization. With Minnesota’s whole spirit centered on launching a trustworthy, daily-use legal market: is making legal weed expensive—literally—the right move?
What This Means for You
- Price at the counter: You’ll be paying 15% extra on cannabis, on top of the usual 6.875% state sales tax—so expect nearly 22% more tagged onto each purchase.
- Town budgets: Your city or county may have to dig deeper when it comes to regulating and policing cannabis retailers—because that 20% local cut is now gone .
- Will the black market win? Critics fear making legal cannabis more expensive right at launch time could push buyers back toward unregulated sellers with cheaper—and riskier—products.
In the Balance
Minnesota is walking a fine line: trying to shore up state revenue without killing the promise of a safe, regulated cannabis market. The gamble is that the higher tax won’t push too many people back underground—and that the state won’t lose out if legal sales don’t meet expectations.
What’ll matter now is timing. If sales lag or unregulated purchases surge, lawmakers might have to rethink this and soften the tax load. But for now, the green wave just got a bit more expensive.
How Minnesota Stacks Up
- Minnesota: The 2025 budget raises the retail excise tax from 10% → 15% of gross receipts—plus the standard 6.875% sales tax, leading to ~22% in total carryover costs—and removes local revenue shares entirely (sfchronicle.com).
🔍 Comparisons: A State-by-State Look
| State | Excise Tax | Typical Total Tax (incl. sales) | Local Share? | Comments |
|---|---|---|---|---|
| Arizona | 16% | ~21–22% (plus TPT + local taxes) | Varies | Excise + sales; locals can tack on extra; mounted for July 2025 (greengrowthcpas.com) |
| California | 15% → 19% (as of Jul 1, ’25) | 15–19% + 7–10% sales | Yes | Highest-retail-only structure; market struggling under burden |
| Massachusetts | 10.75% | ~17–20% incl. sales + up to 3% local | Yes | Excise + sales; locals option possible |
| Michigan | 10% | ~16% (6% sales) | Yes | Revenue shared with municipalities & counties (~$100 M+ in FY25) |
| Missouri | 6% | ~9–12% incl. local additions | Yes | Among the lowest; credited for boosting legal sales |
| New Mexico | 12% (escalating annually to 18%) | 12% + sales tax | Yes | Graduated increase in place |
| Rhode Island | 10% | ~20% (with 7% sales + 3% local) | Yes | Combined “recreational” rate ~20% |
| New York | 13% (retail), 9% (wholesale) | 13% + sales (exempt) | 40% locally directed | Strong revenue sharing; NY hit $161M in ‘FY ending Mar 31’ |
Key Takeaways
- Minnesota is now among the highest taxing states. A 15% excise rate places it at the top of the excise scale (ahead of Arizona’s current 16%), and the combined ~22% burden matches or exceeds many jurisdictions like California and Massachusetts .
- No local revenue = local pushback. Unlike Michigan, New York, or Missouri, Minnesota’s reform pulls local funding entirely, raising concerns for regulators and municipalities .
- States with lighter taxes perform better. Missouri’s low-tax approach showed one of the fastest emerging legal sales, while California’s heavy tax hike (to 19%) has further depressed its legal market-share (~60% remains illicit) despite a massive consumer base (sfchronicle.com).
Minnesota’s Gamble
The state is betting on annual revenue—augmenting its budget with an extra ~$76 M over two years and removing local allocations to plug gaps . But high-tax comparisons from other states suggest:
- Risk of fueling the black market, especially early in the legal rollout.
- Strained local support for regulation and compliance.
- Potential need for a swift pivot if sales underperform or unregulated purchasing climbs.
Let us know what you think about Minnesota’s taxes and as always we are NativeCare, Minnesota’s first and finest cannabis company…
