Washington Provides Tax Break For Medical Cannabis Users, But Is It Enough?

Thanks to a new state law, Washingtonians with valid medical marijuana cards will now enjoy a reduction in tax on their cannabis, The Seattle Times reports.

Washington State's 37% tax rate for recreational cannabis ranks among the highest in the nation. For instance, neighboring Oregon’s is just 17%. The new law aims to alleviate the financial burden on medical cannabis users, making an exception on state retail sales tax.

How to Qualify

The new tax break applies exclusively to medically compliant products. To qualify, buyers must be registered patients in the Department of Health's Medical Cannabis Authorization database. Only products meeting the Department of Health’s standards, including testing for heavy metals and prohibited pesticides, are eligible. Retailers must have a medical cannabis endorsement to provide the tax break.

Patients must be 18 or older to get a medical card, though those under 18 can be registered by a parent or legal guardian. Washington residents diagnosed with qualifying conditions, such as cancer, epilepsy and multiple sclerosis must obtain a medical cannabis authorization form from their healthcare provider to get a card. The cost is $100 for residents and $50 for enrolled EBCI members.

Concerns About Implementation

The state is working on formal rules, expected to take effect by September. In the meantime, the Department of Health is developing publications to help patients, retailers and producers understand and navigate the new law. This tax exemption is set to expire in June 2029, and while it offers immediate relief to medical users, its long-term effectiveness remains to be seen. In the meantime, some members of the cannabis community raised concerns about implementation. For instance, the trade association “Washington CannaBusiness” pointed out that small businesses have not received proper guidance on implementation.

"Our goal is that the integrity of the law is protected so that this new significant financial incentive isn't used as a way to turn back the clock with medical cards available for everyone — including those under 21 — and allow for a new toehold for the illicit marketplace," said Aaron Pickus, spokesperson for the association.

Any Number Of Consequences

The direct implication of the tax reduction for Washington medical marijuana is that products are going to be cheaper for users, who otherwise have to deal with “free market” pricing, which can generate expensive treatment costs that are usually not covered by insurance programs. But, as always with cannabis regulation, one must account for hard-to-predict unexpected consequences. In this case, moving a tax piece of the cannabis jenga may encourage more people to obtain

The change may impact state cannabis tax revenues, which generated nearly $470 million in fiscal year 2023. On the other hand, the move could help Washington improve its competitive stand with neighboring states, as the high taxes have been a point of contention for both consumers and businesses.