Washington State To Eliminate 37% Tax On Medical Marijuana

The State of Washington is set to eliminate excise taxes on medical marijuana products, offering tax relief to medical marijuana patients.

With one of the highest tax rates imposed on medical marijuana products, the Washington Senate recently passed a bill granting an exemption from the 37% excise tax for medical marijuana patients and designated providers.

Initially introduced in 2023, HB 1453 aimed to align the current medical exemptions from general sales and use taxes with the 37% excise tax applied to marijuana sales.

After successful passage in both the House and the Senate, the bill received strong support, with 85 yeas and 12 nays in the House and 36 yeas and 13 nays in the Senate, indicating widespread approval from legislators.

Marijuana Legislation In Washington State

After being one of the first states to legalize medical marijuana in the U.S. in 1998, Washington was the first to legalize the recreational use of marijuana, along with Colorado in 2012.

However, due to an excise tax rate of 37%, medical marijuana patients and providers encounter a substantial financial strain, as they are taxed at the same rate as recreational consumers.

But Washington lawmakers have now moved to differentiate taxation between recreational and medical marijuana, recognizing the medicinal nature of marijuana and exempting the latter from the 37% excise tax, in addition to the existing exemption from general and local sales and use taxes.

Washington State’s Legislation On Removal of Medical Marijuana Tax

This legislation aims to grant a tax exemption for medical marijuana patients in Washington State, revising the marijuana excise taxes to exempt these patients from the marijuana excise tax until June 30, 2029.

Eligible patients or designated providers with a recognition card are, therefore, covered by this exemption for the purchase of legal medical marijuana products.

Sellers are obligated to maintain eligibility records for the exemption and report exempt amounts separately on excise tax forms. All revenue collected from the non-medical marijuana excise tax is allocated to a dedicated account. The law also mandates regular reviews by the state’s Liquor and Cannabis Board, in consultation with the Department of Revenue, to propose adjustments to the legislature that discourage illicit market activity while ensuring affordability for medical marijuana patients. The board also must report biennially to the legislature on various metrics related to marijuana sales and taxation.

Within this legislative framework, Washington’s Joint Legislative Audit and Review Committee is tasked with evaluating alterations in the number of patients or providers, variations in the types and sales of tax-exempt products, and any other relevant details. They have the authority to access pertinent data for their assessment and are required to submit a report to the legislature by December 1, 2028.

With this legislation, Washington lawmakers seek to aid medical marijuana patients by offering tax relief while simultaneously ensuring compliance, affordability, and effective oversight within the marijuana industry.

When Does Washington’s Medical Marijuana Tax Exemption Start?

While this legislation will not address the taxation imposed on recreational marijuana products, the approval of the bill represents a significant advancement in reducing the financial strain on patients and providers, as emphasized in a blog post published by the Seattle-based law firm Harris Sliwoski LLP, which initially broke the news.

The bill now awaits final signature by Governor Jay Inslee to become law. It is slated to take effect 90 days after the current legislative session concludes, offering medical marijuana patients and providers the tax exemption for their medical marijuana products.