If you’re an entrepreneur in New Jersey looking to start or operate a recreational cannabis business, it’s important to understand the taxes that will be imposed on adult use cannabis. In this blog post, we’ll provide an overview of the taxes that are applicable and how much state tax you can expect to pay on cannabis products receipts.
What taxes are imposed on adult use cannabis in New Jersey?
If you are planning to operate a recreational marijuana business in New Jersey, it’s important to understand the taxes imposed on adult use cannabis. The state imposes a 6.625% sales tax and a social equity excise fee of 1/3 of 1% on all adult-use cannabis products. This fee is based on the average retail price of consumable cannabis and for 2023, it amounts to $1.52 per ounce.
It’s worth noting that medical marijuana in New Jersey is not subject to sales tax but there is an annual $25 renewal fee for each medical marijuana card. As businesses navigate the complex landscape of legalization and regulation, understanding these taxes will be crucial in order to stay compliant with state laws while building a successful enterprise.
Sales tax
Sales tax on adult use cannabis in New Jersey is 6.625%. To remit sales taxes for adult use cannabis, businesses must register with the Division of Taxation and file a Sales and Use Tax Return each month. The due date for filing returns and paying taxes is the 20th day of the following month.
Exempt transactions from sales tax on adult use cannabis include purchases made by registered medical marijuana patients, purchases made by dispensaries to resell products to registered medical marijuana patients, and transactions involving transfers between licensed facilities or out-of-state transfers subject to the Alaska Cannabis Transfer Tax.
Guidance on legal weed taxes in New Jersey can be found through resources provided by the state’s Division of Taxation. Entrepreneurs looking to start or operate a cannabis business should ensure they are familiar with these guidelines to avoid any potential legal issues related to taxation.
Social equity excise fee
The social equity excise fee is a tax imposed on legal weed in New Jersey. It is paid by businesses engaged in the transfer of cannabis and is calculated based on the average retail price of consumable cannabis per ounce. The purpose of this fee is to support social equity initiatives that aim to provide equal access and opportunities for individuals who have been disproportionately affected by past marijuana laws.
The social equity excise fee in New Jersey helps create a level playing field for all participants and supports programs that promote economic development, job creation, education, and health initiatives.
This fee presents benefits for both entrepreneurs and communities in New Jersey. Businesses can contribute to building a more equitable industry while also complying with state regulations, which ultimately helps create a level playing field for all participants. Moreover, the funds generated from this fee will be used towards programs that promote economic development, job creation, education, and health initiatives in impacted areas across the state like Alaska through guidance from Division of Taxation.
How much tax will I pay on cannabis products?
If you’re purchasing adult use cannabis products in New Jersey, expect to pay a 6.625% sales tax and a social equity excise fee of 1/3 of 1%. The latter is based on the state’s average retail price of consumable cannabis and amounts to $1.52 per ounce for the year 2023.
Medical marijuana in New Jersey, on the other hand, is exempt from sales tax but entails a $25 fee with each medical marijuana card renewal.
Adult use cannabis tax rates
Overview of adult-use cannabis taxes in New Jersey
New Jersey imposes a 6.625% sales tax and a social equity excise fee of 1/3 of 1% on adult-use cannabis products. The excise fee is calculated based on the state’s average retail price for consumable cannabis, which for 2023 is $1.52 per ounce.
Impact of local taxes on adult-use cannabis products
In addition to state-level taxes, some municipalities in New Jersey may impose additional taxes or fees on adult-use cannabis businesses. These local taxes can vary widely and may significantly impact the profitability of a business.
How to calculate the excise tax for adult-use cannabis
To calculate the social equity excise fee owed on each ounce of consumable marijuana sold, multiply the current average retail price by .00333 (or divide it by 300). It’s important to note that this calculation only applies to consumable marijuana and not other types of cannabis products like extracts or topicals.
Medical marijuana tax rates
Explanation of Medical Marijuana Taxes in New Jersey:
Unlike adult-use cannabis, medical marijuana is exempt from sales tax in the state of New Jersey. However, there is a $10 fee for each ounce sold to registered patients or caregivers.
Tax Exemptions and Discounts for Registered Patients and Caregivers:
Registered patients and caregivers are eligible for certain tax exemptions and discounts when purchasing medical marijuana products. These include:
- Sales tax exemption
- Reduced price on medical marijuana purchases
- Reduced fees for card renewals
Comparison Between Medical Marijuana and Adult-use Cannabis Taxes:
While medical marijuana is exempt from sales tax, adult-use cannabis products are subject to a combination of sales taxes and social equity excise fees based on the product’s retail price. This means that consumers can expect to pay significantly more per gram or ounce when purchasing adult-use cannabis compared to its medicinal counterpart.
As an entrepreneur looking to start or operate a cannabis business in New Jersey, understanding these differences between medical marijuana taxes versus adult-use cannabis taxes will be crucial in determining pricing strategies while adhering with state regulations.
Conclusion
New Jersey’s adult-use cannabis tax system presents a complex and challenging landscape for entrepreneurs looking to start or operate a cannabis business. While the state has implemented an excise tax of 6.25% on all cannabis products to generate tax revenue, there are additional taxes imposed at the local level, such as sales taxes and municipal taxes. This can have a significant impact on profit margins for businesses.
Despite these challenges, there are potential solutions and strategies that businesses can employ to navigate the tax landscape successfully. One key strategy is to work closely with knowledgeable legal counsel who can guide companies through compliance requirements and help them take advantage of any available exemptions or deductions.
Additionally, some businesses may consider forming partnerships or joint ventures to share costs and resources while spreading out their risk across multiple entities. Ultimately, with careful planning and execution, it is possible for entrepreneurs in New Jersey’s burgeoning cannabis industry to thrive despite the challenges presented by the state’s tax system.
