Marijuana Reform and Taxes: How States Tax Adult Use Cannabis and Spend Resulting Revenue

Introduction

States that have legalized adult-use recreational marijuana use a variety of tax strategies including special marijuana sales tax as a percentage of price, general state sales tax (plus applicable local sales tax), weight-based sales tax, or THC-potency tax. Regardless of the type, marijuana tax revenue supports a range of programs and initiatives including substance use/addiction recovery and public health, states’ general fund, law enforcement and public safety, or social equity programs. Ten states, including Ohio, have specifically allocated a certain percentage of the special tax revenue to local governments without putting restrictions on how this money can be spent. However, the way in which local governments spend the resulting revenue is underexplored, with only anecdotal accounts from individual jurisdictions and no systematically collected data.

Ohio’s original enacted statute, which became effective on December 7, 2023, established Chapter 3780 (now 3796 following S.B. 56) within the Ohio Revised Code. Among other things, the law specified how recreational marijuana will be taxed and how the resulting tax revenue will be allocated. On December 9, 2025, the Ohio General Assembly passed Senate Bill 56, which makes several changes to Ohio’s marijuana laws and for the first time addresses intoxicating hemp products. The bill, which becomes effective March 20, 2026, also changed how adult use excise tax revenue is allocated.

This page aims to inform discussion of marijuana taxation and revenue allocation, at both the state and local level. We detail how the Ohio initiative’s tax and revenue structures compared to the other 23 states that have already fully legalized marijuana for adult use and provide the first systematic exploration into how local governments spend or are planning to spend marijuana tax revenue in states that allocate part of their overall marijuana state tax revenue to local governments.

Visit our resource page on Ohio’s adult-use marijuana to learn more.

NOTE: This page was last updated January 27, 2026. It does not incorporate citations. Download the reports below to find the full list of sources and references used.

Host Community Cannabis Fund Tax Revenue per Municipality

The following map displays adult use marijuana tax revenue allocated to each participating locality via the Host Community Cannabis Fund and the Ohio Department of Taxation. The map utilizes data from the Ohio Department of Taxation and the U.S. Census Bureau. The map also includes the top 15 Ohio universities by enrollment population to add additional geographical context for users.

How to Use the Map

• Population Filter: Users can filter localities using the population filter at the top right hand corner of the map by sliding left or right.
• Fiscal Year: Users can select to view either total tax revenue or tax revenue for a specific fiscal year by selecting it from the Fiscal Year dropdown at the top right hand corner of the map. Colors for each locality will change depending on how much tax revenue was earned for the time period selected. 
• Map Reset: If a user clicks on a location on the map, the map can be reset using the “ESC” key. To go back to the original zoom setting after zooming in, scroll to the top left-hand corner and click the Home icon labeled “Zoom Home”.
• Navigating the Map: To move around the map, use the map controls on the left, hover/click the Play button icon, and select the intersecting lines with arrows, or press the “F” key on your keyboard. This enables moving the map by clicking and dragging (hold left mouse key) to the desired location. Zoom with the mouse touchpad, scroll wheel, or the dashboard controls in the top left-hand corner. Localities have been categorized by total dollars allocated and can be identified by using the color gradient scale found in the margin to the right of the map. Users can hover over each locality to identify revenue allocated for each applicable Fiscal Year, as well as the total number of dispensaries for that jurisdiction in the same time periods.

Keyboard navigation instructions for Tableau are available. If you have any trouble using or accessing the map, please reach out to ridgway.54@osu.edu for assistance.

Ohio's Recreational Marijuana Tax Plan Following Enactment of S.B. 56

The marijuana reform law passed by voters in November 2023 established a special 10% tax on the sale of adult-use cannabis, in addition to the traditional fixed state sales tax of 5.75% and local variable sales taxes that can be as high as 2.25%. The statute is silent on the allocation of the revenue from state and local sales tax, but it does specify that all money collected from the special 10% marijuana tax will be deposited into a newly established Adult Use Tax Fund, which would then be divided as follows: 36% for Host Community Fund, 36% for Social Equity and Jobs Fund, 25% for Substance Abuse and Addiction Fund and 3% to fund operation of the Division of Cannabis Control. S.B. 56 did not change tax rates, but it did change excise tax revenue allocations. When S.B. 56 goes into effect March 20, 2026, revenue will be allocated on quarterly basis to the following funds and for the following purposes:

How Are Other States Taxing Adult-Use Marijuana?

There are four different types of taxes levied on legal marijuana states across the 23 legal states: special marijuana sales tax as a percentage of price, general state sales tax (plus applicable local sales tax), weight-based sales tax, and THC-potency tax. The most common type of tax imposed by states is the percentage-of-sales tax levied at the time of purchase, as well as the general state and local state taxes. Only three states impose a THC potency tax (Illinois, New York and Connecticut), with five additional states imposing some form of weight-based tax, whether at the point of consumer sale or at the point of wholesale (Alaska, Colorado, Maine, Nevada, and New Jersey).

While a comparison across all 23 states is complex given the type of tax and price variations, we can readily compare the taxes levied at the point of purchase for the 19 states that do not impose potency-based or weight-based tax at the point of purchase (for the purposes of this paper, we are including statewide sales taxes, but excluding local sales taxes given variation among different localities within a state). As set forth in Figure 2 below, the tax rates imposed by the 19 states differ significantly, with the lowest tax adopted by the state of New Jersey at 6.625% and the highest tax imposed by Washington at 43.5% (three of these states also levy a wholesale tax at the point of sale from wholesaler to dispensary – Colorado at 15%, Nevada at 15% and Michigan at 24%).

Figure 1: Tax rates at point of sale

Of the 19 states that impose a percentage-of-price retail tax at the point of sale, only one charges less than 10%, eleven charge between 10-19% and seven states tax 20% or more, which results in a median tax rate of 17% and average rate of 18%. In most cases, the effective tax rate at point-of-sale results from a combination of a special marijuana tax plus the standard state sales tax. But a few states rely only on a special marijuana tax or only on a standard sales tax as the means of taxing recreational retail cannabis sales.

Ohio’s recreational cannabis retail tax rate of 15.75% (10% special marijuana tax plus 5.75% regular state sales tax, excluding local sales tax) puts Ohio slightly below the average and median tax imposed by other states, but equals almost exactly the direct sale tax rate imposed by the only neighboring state, Michigan (16%), that has legalized marijuana for adult use (in 2025 Michigan passed an additional 24% wholesale tax, which went into effect in January 2026).

Since 2021, the Quarterly Summary of State & Local Tax Revenue (QTAX) survey from the United States Census Bureau has included cannabis excise tax revenue data. Figure 2 shows the cannabis excise tax revenue generated per person from July 2025 to June 2026 in each of the states that now have some form of legal marijuana market. 

Figure 2: State Cannabis Excise Tax Revenue per Capita

How Are States Allocating Their Marijuana Tax Revenue?

Marijuana tax revenue supports a number of different programs and initiatives across the 23 states that have legalized adult-use marijuana sales. While details for each state differ, we created eleven categories to allow us to compare allocations across states as shown in Table 1 below. Two key notes: first, some of these categories are not mutually exclusive. In several instances we classified one state funding provision under two categories due to the stated purpose of the allotted funding. For instance, Alaska allocates 25% of their marijuana retail tax revenue to fund the Marijuana Education Fund, which fits into both the Substance Use and Addiction Recovery category as well as Public Health category we set forth below. Second, we are not able to determine whether marijuana tax revenue deposited into the state’s general fund is ultimately used to fund some of the eleven categories indirectly. For instance, New Mexico channels nearly 70% of its marijuana tax revenue into the state’s general fund and we cannot determine whether some of this revenue does not end up indirectly funding substance abuse programs in the state.

The four categories that are most frequently funded by the 23 states are:

• the state's general fund (13 states),
• substance use and addiction recovery and public health (14 states),
• public health programs (13 states),
• and oversight/administration and law enforcement and public safety (13 states).

The portion of tax revenue devoted to each category, however, differs significantly from state to state. For instance, some states are investing as much as 70% of their marijuana tax revenue in social equity programs (New Jersey), while others are setting aside only 7% for that purpose (Delaware).

Additionally, while some states break down their revenue allocation by percentages, other states, such as California, chose to designate a fixed amount of funding to each category for a specific number of years.

Table 1. Tax Allocation Categories Across 23 Adult-Use States

Conclusion

Ohio’s tax rate seems to be in line with the practices of other states. As mentioned above, the tax rate of 15.75% (10% special marijuana tax plus 5.75% state sales tax) for cannabis retail sales is very close to the median of the remaining states (17%). The original tax allocation (3% to administrative costs, 25% to substance use treatment, 36% to localities with operating cannabis entities, and 36% to a social equity program) aligned with some of the funding priorities we see in other recreational states. The new allocation under S.B. 56 where 64% is allocated to the general fund and the remainder going to host communities is somewhat more unusual as most states specify their spending priorities in greater detail.

The Ohio General Assembly, along with Governor DeWine, have signaled a desire to increase the tax rate although the newly passed SB 56 left the effective rate unchanged. Whether future tax adjustments will be made remains to be seen, but any change will need to balance a desire to maximize tax revenue and deterrence of problematic use with desire to curtail the illicit cannabis market. A higher tax rate might theoretically bring in additional tax revenue, but it can also incentivize adult customers to purchase their cannabis product from unsanctioned sellers if the higher tax results in uncompetitive prices for legal cannabis product.