How marijuana purchases are taxed in New Jersey
The cannabis you enjoy, or need, could be priced very differently from one New Jersey town to the next.
New Jersey's medicinal marijuana market has been up and running for years, and the adult-use market has been operational since April 2022, but there's still plenty of confusion among consumers regarding when they're expected to pay taxes on their marijuana purchases, and how much.
"The pricing for the taxes is never really communicated clearly online," said Bri Rinaldi, who's been a patient in New Jersey's medicinal marijuana program since 2016 and has been working in the industry for a few years.
Sales tax on marijuana in New Jersey
Up until this summer, medicinal cannabis purchases were subject to sales tax. Under the Jake Honig Compassionate Use Medical Cannabis Act, the rate was inching down over the past few years, until it hit 0% on July 1.
The full state sales tax, which is a little more than 6.5%, still applies to recreational cannabis purchases, however.
Local transfer tax on marijuana in New Jersey
With that same act that eventually scrapped the sales tax from medicinal marijuana transactions, municipalities were given the green light to levy a local "transfer" tax of up to 2% on dispensary purchases of medicinal cannabis products. Such a tax is not automatic; a municipality must adopt an ordinance establishing the tax and rate.
The same 2% maximum applies to sales of adult-use cannabis. So, together with the sales tax, consumers may end up paying close to 9% more than the sticker price inside a dispensary.
"Generally speaking, the prices that are promoted for the cannabis are just gross price before any taxes," said Ren Cicalese, an associate partner with Alloy Silverstein, an accountants and advisors firm in New Jersey.
According to the New Jersey League of Municipalities, it's believed that most municipalities that have permitted cannabis establishments also have ordinances establishing a local tax. Most, the group said, have opted for the maximum rate.
Rinaldi, who will manage Sweetspot Dispensary in Voorhees when it opens in a few weeks, confirmed that consumers will not face a local tax when purchasing marijuana. For the next several months, the establishment will serve only the medicinal market.
NJ's Social Equity Excise Fee
This fee is not something you'd see on your receipt at a dispensary, but it could be built into the price you pay, Cicalese said.
The fee, which raises funds for investments in areas of New Jersey that have been harmed the most by the war on drugs, is charged by a cannabis cultivator when their product is sold or transferred to another entity.
"Businesses may ultimately pass it on to consumers, but it's not a direct tax," Cicalese said.
The current rate, which is decided upon each year by the Cannabis Regulatory Commission, is $1.10 per ounce of cannabis.