States Collected More Than $9.7 Billion In Marijuana Tax Revenue Since Mid-2021, Federal Census Bureau Reports

U.S. states where cannabis is legal have raked in more than $9.7 billion in marijuana tax revenue since the middle of 2021, according to newly updated federal data from the Census Bureau—that’s up nearly $1 billion since the agency last updated its cannabis revenue tracker in September.

During the third quarter of 2024—the most recent period for which data is available—states reported about $734.8 million in total marijuana tax revenue to the federal agency.

The new data, however, also revises upward figures from other recent quarters, adding up to a billion-dollar growth in reported state revenue in the last three months. The second quarter of this year, for example, saw an update from $609.9 million to $840.4 million—a new quarterly record, according to the agency’s tracking.

Individual states reporting the highest dollar amounts during Q3 of 2024 were adult-use jurisdictions with more established markets and larger populations: California ($159.6 million), Michigan ($79.3 million), Washington State ($77.3 million) and Illinois ($72.8 million).

Among the lowest were more restrictive states like Louisiana ($284,000) and Mississippi ($385,000) as well as Washington, D.C., where marijuana is legal for adults but sales of non-medical cannabis remain illegal.

In addition to reporting revenue amounts from marijuana, the Census Bureau tracking tool—what the agency has described since its introduction last year as an “experimental data product”—also notes what percentage of each state’s total tax revenue comes from cannabis. States with the highest portions of total revenue from marijuana in Q3 were Montana (1.57 percent of total tax revenue), Colorado (1.19 percent) and Alaska (1.16 percent).

As far as changes in revenue from the prior quarter, jurisdictions in Q3 with the biggest increases in cannabis tax revenue were Rhode Island and New York, where licensed markets are still young and growing, and Washington, D.C. Those governments saw quarterly increases in marijuana tax revenue of 37.3 percent, 28.3 percent and 27.4 percent, respectively.

States that saw the biggest decreases in revenue compared to Q2 were Washington State (48.4 percent), Connecticut (30.7 percent), Massachusetts (30.0 percent) and Arizona (15.3 percent).

Notably, however, the Census tracker’s numbers lag behind the real-time market. Data is also incomplete. For example, Nevada, New Jersey and Arkansas have not yet reported any information for Q3 despite having provided data in past quarters.

The agency says figures shown are “based on a calendar quarter and generally represent taxes collected on sales made during the prior quarter (i.e. data released in September 2023 will cover sales during the quarter ended June 30, 2023).”

While not every state with legal marijuana has consistently provided data for the Census Bureau’s map, the project nevertheless represents the federal government’s growing effort to account for the size and scope of the cannabis industry—which despite the growing number of state legalization laws remains federally illegal.

Last year, before the launch of the interactive map, the agency published a report showing that legal cannabis states had collected more than $5.7 billion in marijuana tax revenue over an 18-month period. Earlier that year, it also updated its survey of private businesses to better capture marijuana-related economic activity.

Together, the tracking and reporting efforts—which come nearly a decade after the first state-legal sales of adult-use cannabis in the United States—indicate an increasing willingness by the federal government to acknowledge the billions of dollars in annual economic activity generated by an industry that it continues to prohibit.

The new state tax revenue data used to build the infographics “result from a complete canvass of all state government agencies,” the bureau said in a note last year about its survey methodology. While it refers to the revenue as “quarterly cannabis excise sales tax collections,” it also says that “taxes” are defined rather broadly.

“For this dataset, the concept of ‘taxes’ is comprised of all compulsory contributions exacted by a government for public purposes,” Census said. “Tax revenue is further defined to include related penalty and interest receipts of a government but to exclude protested amounts.”

The bureau has two separate tax codes for marijuana revenue that it asks states to report, one for taxes on cannabis transactions and another for business license fees.

How much #tax revenue does your state bring in from cannabis sales?

Find out with our #DataVisualization: https://t.co/nM7Zogg743#CensusEconData #StateGovernment #DataViz pic.twitter.com/gXpzAEklxC

— U.S. Census Bureau (@uscensusbureau) December 16, 2024

The agency has said its own figures might not align perfectly with state-reported data “because the Census Bureau may be using a different definition of which organizations are covered by the term, ‘state government.’” The bureau’s definition, it explains, “refers not only to the executive, legislative, and judicial branches of a given state, but it also includes agencies, institutions, commissions, and public authorities.”

Research published in May by the advocacy group Marijuana Policy Project found that states have generated more than $20 billion in marijuana tax revenue since the first markets opened a decade ago.

Separate tracking of marijuana revenue spending at the local government level shows that the bulk of funds go toward law enforcement and municipalities’ general funds, with relatively few cities and towns allocating cannabis-generated money to support education or public health.

That review, from researchers at the Ohio State University’s Moritz College of Law, looked specifically at three U.S. states with existing adult-use cannabis programs—Michigan, New Mexico and Oregon—as well as Ohio, where marijuana sales began in August but tax revenue has not yet been allocated to local governments. Researchers reached out to 501 localities across the four states, and heard back from about a third of them.

“The survey responses indicate the most frequent utilization of marijuana tax revenue funds involve three areas,” the report found: “depositing revenue into the general fund for use as needed, supporting local law enforcement, and funding parks and recreation in local communities.”

In addition to asking local jurisdictions about the amount of tax money received and how it’s spent, researchers also queried municipalities about how they felt revenue should be spent. Responses to that question largely align with current spending priorities, they found.

“Most believed it should be deposited into the general fund, although there was some variation across states with respondents from New Mexico selecting “Other” most often and respondents from Oregon favoring law enforcement,” the paper says. “Law enforcement was the second most popular choice overall, followed by “Other” and parks and recreation.”

In addition to asking local jurisdictions about the amount of tax money received and how it’s spent, researchers in that study also queried municipalities about how they felt revenue should be spent. Responses to that question largely align with current spending priorities.

“Most believed it should be deposited into the general fund, although there was some variation across states with respondents from New Mexico selecting “Other” most often and respondents from Oregon favoring law enforcement,” the paper said. “Law enforcement was the second most popular choice overall, followed by “Other” and parks and recreation.”

It’s not necessarily the case that those views from officials align with the opinions of the residents they serve. A study published earlier this year in the International Journal of Drug Policy found that residents of New Jersey, for instance, felt cannabis revenue should fund education and housing, not police or anti-drug campaigns.

At the state level, many jurisdictions have earmarked considerably more cannabis tax revenue for community reinvestment.

California officials in June, for example, awarded another round of community reinvestment grants to nonprofits and local health departments, funded by marijuana tax revenue. The Governor’s Office of Business and Economic Development (GO-Biz) announced the recipients of over $41 million in awards, the sixth round of cannabis-funded California Community Reinvestment Grants (CalCRG) under the state program. In March, officials awarded $12 million in marijuana tax-funded grants to cities across the state to support equity programs for people disproportionately impacted by the war on drugs.

And in Illinois earlier this year, officials announced that they’re awarding $35 million in grants to 88 local organizations, using funds generated from taxes on adult-use marijuana sales to support community reinvestment efforts.

The funding is being offered through the state’s Restore, Reinvest, Renew (R3) Program that was established under Illinois’s 2019 legalization law. It requires 25 percent of cannabis tax revenue to support areas most harmed by the “disproportionate damaged caused by the war on drugs,” the Illinois Criminal Justice Information Authority (ICJIA) said.

Since launching the R3 program, Illinois has awarded over $244 million in marijuana revenue-funded grants to that end.

In New York, meanwhile, cannabis regulators last month began accepting grant applications for a $5 million community reinvestment program funded by marijuana tax revenue. The effort, which will support services such as mental health, workforce development and housing for young people, is part of an push to reinvest state cannabis monies in areas “disproportionately affected by prior federal and state drug policies in order to redress a wide range of community needs.”

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