If everything goes according to plan, New Jersey could be the state with the lowest tax rate for legal weed sales. Voters are expected to vote on a marijuana legalization measure that seeks to allow the state to subject a sales tax of 6.625% on legal weed sales.
All cities allowing the sale of legal weed would be authorized to impose a maximum of 2% transfer tax which would total up to 8.625%. This would still be the lowest tax imposed on legal marijuana sales in the U.S.
According to marijuana analysts, the low taxes would enable legal marijuana to compete with and eventually eradicate the illicit weed market. The period in which New Jersey will be able to start implementing the low rate tax is uncertain.
According to the president of the New Jersey Cannabusiness Association, Scott Rudder, voter approval for recreational weed in the 2020 elections could lead to additional details such as Excise taxes.
Rudder also said that the ballot question should be detailed so that the voters can make an informed decision.
He was of the view that the new regulations would not be implemented until the voters approve the measure, and the tax proposals for the marijuana industry may still be altered.
Rudder also said other states might legalize marijuana and the desire to have common taxes in the Northeast states where marijuana is legal may force New Jersey to abandon its measure in favor of a collective position agreed upon with neighboring states.
New Jersey would be the only state not imposing an additional tax, such as excise tax, because all the other states that have legalized recreational marijuana impose some excise tax on legal weed sales, which amounts to about 26% when you add both sales and excise tax.
Washington has the highest percentage of tax on legal weed sales, whose average is 43%, while Michigan customers pay the lowest, at 16%.
States where weed is legal allow their cities to impose their additional taxes besides the general sales taxes imposed by the state.
The executive director of the National Organization of Marijuana Laws, Erik Altieri, said that there is a possibility that New Jersey will impose some excise tax by the time the first ounce of legal cannabis is sold. Altieri further noted that the state law would continue to evolve once marijuana is legalized.
Legalization of weed has been a topic for debate in the Legislature for the last two years and the proposed pot taxes have gone through many changes. State Senator Nicholas Scutari introduced a bill in the state Assembly which suggested for an increasing marijuana tax which would begin at 7% and rise to 25% over the next few years. The last bill proposed a $42 flat-rate fee per ounce, which equates to a 12% tax rate. This would ensure a steady source of revenue, even if the market price for marijuana drops.
Scutari said that removing the additional taxes is a sure way of fighting the black market because people would be more inclined to buy the cheap, safe, and high-quality weed from a licensed dispensary instead of purchasing from an illegal dealer.
These proposals seem good on paper, but experts say industry actors like SinglePoint Inc. (OTCQB: SING) and Lexaria Bioscience Corp. (CSE: LXX) (OTCQX: LXRP) have learnt that nothing is clearcut in New jersey, so they will only wait to see the final law which is cleared for implementation.
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