The New York cannabis tax adds 13% to every adult-use purchase at the register, and a separate 9% wholesale excise tax is built into the shelf price before you ever walk in. No regular state or local sales tax applies on top. Medical cannabis is taxed at a far lower 3.15%. The state pools the revenue in a dedicated fund and splits it among schools, community reinvestment, and drug treatment.
What You Pay at the Register
Two excise taxes appear on an adult-use receipt. A 9% state excise tax under Tax Law § 493(b) and a 4% local excise tax under § 493(c) combine for 13% on the retail price.1New York State Senate. New York Tax Law 493 – Imposition of Tax
Adult-use cannabis is exempt from New York’s regular sales tax and from the vapor products tax.2New York Department of Taxation and Finance. Adult-Use Cannabis Products Tax The 13% is the whole tax at the point of sale. On a $50 purchase, that’s $6.50 in tax. The retailer collects both pieces and remits them to the state.
The 9% Wholesale Tax Built Into the Price
Before product reaches the shelf, a 9% excise tax applies when a distributor transfers cannabis to a retailer under Tax Law § 493(a). The distributor owes it, but the cost is priced into what you pay.1New York State Senate. New York Tax Law 493 – Imposition of Tax
This flat 9% replaced a potency-based tax that charged different rates by THC content across flower, concentrates, and edibles. The FY 2025 state budget repealed the potency system effective June 1, 2024.3New York State Assembly. FY 2025 New York State Executive Budget Revenue Article VII Legislation Memorandum in Support
Microbusinesses and registered organizations that sell straight to consumers act as both distributor and retailer. For them, the 9% wholesale tax applies to 75% of the retail price rather than the full amount, though the 13% retail tax still applies to the full sale price.2New York Department of Taxation and Finance. Adult-Use Cannabis Products Tax
Medical Cannabis Is Taxed Differently
Medical cannabis sits outside the adult-use regime entirely. Registered organizations pay a 3.15% excise tax on gross receipts from cannabis sold to certified patients or their designated caregivers, under Tax Law § 490(2). The rate took effect June 1, 2024.4New York Department of Taxation and Finance. Summary of 2024 Sales and Other Tax Type Changes The adult-use 13% retail taxes do not apply to medical purchases.1New York State Senate. New York Tax Law 493 – Imposition of Tax
The gap is real money. On $100 of product, a medical patient pays $3.15 in tax; a recreational buyer pays $13 at the register, with the 9% wholesale tax already baked into the price on top of that. A share of medical tax revenue is directed back to the counties where the product was manufactured and sold.
Where the Revenue Goes
Adult-use cannabis tax revenue flows into the New York State Cannabis Revenue Fund created by State Finance Law § 99-ii. After administrative costs, the balance splits three ways:5New York State Senate. New York State Finance Law 99-II – New York State Cannabis Revenue Fund
- 40% goes to public schools through the State Lottery Fund, distributed as additional lottery grants to school districts.
- 40% goes to the Community Grants Reinvestment Fund, which supports communities disproportionately affected by past cannabis enforcement.
- 20% goes to the Drug Treatment and Public Education Fund, which finances substance abuse treatment and public health education.6New York State Senate. New York State Finance Law 99-JJ – New York State Drug Treatment and Public Education Fund
How the Local 4% Reaches Your Town
The 4% local excise tax follows a specific path under Tax Law § 496-B. The state comptroller sends the money to counties. Each county keeps 25% and passes 75% to the towns, villages, and cities where dispensaries physically sit, in proportion to each municipality’s share of cannabis sales as tracked by the state’s seed-to-sale system. Counties must distribute those quarterly payments within 30 days of receiving them.7New York State Senate. New York Tax Law 496-B – Administrative Provisions
When a dispensary sits in a village inside a town and both allow cannabis sales, the county splits that share between the two. The town and village can negotiate the proportion, and the county divides it evenly if they can’t agree.7New York State Senate. New York Tax Law 496-B – Administrative Provisions
One boundary worth knowing: municipalities that opted out of retail dispensaries under the Marijuana Regulation and Taxation Act receive no share of the 4% local tax. Buy cannabis in a neighboring town and the local revenue benefits that town and its county, not yours.
Federal Tax Rules for Cannabis Businesses
State tax is only part of the picture for anyone running a cannabis business. Under Internal Revenue Code Section 280E, businesses trafficking in Schedule I or II controlled substances cannot deduct ordinary business expenses from gross income. Cannabis operators have been limited to subtracting cost of goods sold, effectively paying federal tax on gross profit rather than net income.8Taxpayer Advocate Service. Despite Operating Legally in Many States, Marijuana-Related Businesses Face Significant Federal Income Tax Law Challenges For a dispensary with thin margins, that can turn a modest operating profit into a serious federal tax bill.
The federal government proposed rescheduling cannabis from Schedule I to Schedule III, and the Treasury Department and IRS have said rescheduling would lift the Section 280E barrier and allow standard deductions and credits.9U.S. Department of the Treasury. Treasury, IRS Announce Process for Tax Guidance Following DOJ Cannabis Rescheduling Final action on rescheduling has not been completed.10Congress.gov. Legal Consequences of Rescheduling Marijuana
Individual consumers get no federal break. The IRS does not treat cannabis as a deductible medical expense, including for medical patients, because it remains federally controlled.