Maryland charges a flat 12% sales and use tax on adult-use cannabis sold at licensed dispensaries. That rate took effect July 1, 2025, replacing the 9% rate that applied when recreational sales launched on July 1, 2023.1Maryland General Assembly. Maryland Code Tax-General 11-104 It applies uniformly across product categories, so flower, concentrates, and edibles are all taxed at the same rate. Medical cannabis purchases are exempt.
What You Pay at the Register
The retailer multiplies the pretax price by 0.12 and adds that to your total. A $50 purchase of flower comes to $56.00: $50 for the product and $6.00 in cannabis tax. The dispensary collects the tax at the point of sale and later remits it to the Comptroller.
A mixed cart gets taxed at different rates on different lines. Accessories like rolling papers and storage containers fall under Maryland’s standard 6% sales tax.2Comptroller of Maryland. Tax Alert Cannabis Questions and Answers for Individuals Electronic smoking devices and vaping products carry a 20% rate as of July 2024.3Comptroller of Maryland. Sales and Use Tax Facts 2024-2025 Your receipt should show each rate separately.
Medical Cannabis Is Exempt
Purchases made through Maryland’s medical cannabis program carry no sales and use tax.4Cornell Law School. Maryland Code Regulations 14.17.04.08 – Tax Exemption of Medical Cannabis You need a valid medical cannabis card, and the exemption only covers purchases up to the amount your provider has certified. Walk in without the card and the dispensary rings the sale up as adult-use at 12%.2Comptroller of Maryland. Tax Alert Cannabis Questions and Answers for Individuals
What Dispensaries Must Do to Collect and Remit
Every licensed cannabis retailer needs a Sales and Use Tax License from the Comptroller of Maryland for each dispensary location. That’s a separate registration from the business license issued by the Maryland Cannabis Administration.5Comptroller of Maryland. Tax Alert – Questions and Answers for Cannabis Businesses The Comptroller assigns a filing frequency, usually monthly or quarterly, based on gross sales volume. Returns and payments are due by the 20th of the month after the reporting period closes.6Maryland Comptroller. Business Tax Tip 22 – Maryland Sales and Use Tax Frequently Asked Questions
Retailers file Form 202 through the Comptroller’s bFile system. One wrinkle: federal restrictions on the word “cannabis” led the form to reference the Cannabis Reform Act bill number rather than name the product. Earlier guidance put cannabis sales on Line 12, labeled “Sales subject to the 9% rate under Senate Bill 516 of 2023.” The form may have been updated to reflect the 12% rate, so pull the current instructions before filing.5Comptroller of Maryland. Tax Alert – Questions and Answers for Cannabis Businesses
If you operate more than one dispensary, file a separate return for each physical address so revenue is credited to the correct local jurisdiction. Keep all sales records, including the split between taxable adult-use and exempt medical transactions, for at least four years and have them ready for audit.7Comptroller of Maryland. Business Tax Tip 2 – Sales and Use Tax Records
Where the Revenue Goes
The Comptroller distributes cannabis tax revenue quarterly under an allocation set by the Cannabis Reform Act. The three percentage points added when the rate rose from 9% to 12% go to the state General Fund before anything else is distributed.8Comptroller of Maryland. Maryland Collects $26.8 Million in Cannabis Tax Revenue July Through September 2025
The remaining 9% portion is divided this way:
- 35% to the Community Reinvestment and Repair Fund, which supports communities disproportionately affected by cannabis prohibition enforcement before July 2022.
- 5% to Maryland counties, distributed proportionally based on where sales occurred.
- 5% to the Cannabis Public Health Fund.
- 5% to the Cannabis Business Assistance Fund, which helps small, minority-owned, and women-owned businesses enter the industry. This fund is authorized through fiscal year 2028.
Whatever remains after those distributions also flows to the General Fund.8Comptroller of Maryland. Maryland Collects $26.8 Million in Cannabis Tax Revenue July Through September 2025
The Federal 280E Problem
Maryland’s 12% is only part of what a dispensary owes. Because cannabis remains a Schedule I controlled substance federally, Section 280E of the Internal Revenue Code bars businesses that traffic in Schedule I or II substances from deducting ordinary expenses like rent, payroll, utilities, and marketing.9Office of the Law Revision Counsel. 26 USC 280E – Expenditures in Connection With the Illegal Sale of Drugs
The only deduction a cannabis business can claim is cost of goods sold, which covers direct costs of acquiring or producing inventory. Everything else a typical business writes off is disallowed. Effective federal tax rates can reach 70% or higher because income tax is calculated on gross profit rather than net. Careful inventory accounting under IRC ยง 471 is usually the only lever available to reduce that burden.
The DEA proposed rescheduling cannabis to Schedule III in May 2024, and President Trump signed an executive order in December 2025 directing the attorney general to expedite the process. As of early 2026, rescheduling remains pending and 280E still applies to every Maryland cannabis return.
Can Counties Add Their Own Cannabis Tax?
Generally, no. The power to tax belongs to the General Assembly, not to counties or cities under home rule, and Maryland has not broadly authorized local cannabis taxes. Baltimore City, Baltimore County, and Montgomery County hold special broad taxing authority that could in theory let them tax cannabis independently, but most jurisdictions would need explicit legislative authorization. For nearly all buyers and retailers, the 12% state rate is the only cannabis-specific tax on the receipt.