Potency Tax Could be a Major Buzzkill for Sanctioned Cannabis Retailers

Participants worried tax system may drive consumers to underground dealers.

This story was written in partnership with Crain’s New York, the trusted voice of the New York business community. 

One of the most controversial aspects of New York’s new recreational cannabis market is its tax system, which some have worried will undermine licensed businesses by driving consumers to cheaper underground dealers.

A white paper published in December by a pair of New York tax attorneys, just weeks before the formal start of recreational marijuana sales on Dec. 29, warned of that very possibility. It predicted—and was proven accurate after sales launched—that a legal eighth of cannabis flower in New York with 30% THC would cost about $75.

Prices at Housing Works—the first state-sanctioned cannabis retailer in the five boroughs—proved to be not far below that, with prices fluctuating because taxes are based on THC potency. According to the nonprofit’s online menu, an eighth of cannabis flower ranges in price and potency from 19% THC for $40 to 27% for $60. With the 13% excise tax added, out-the-door prices would be between $45 and $68, respectively.


Potency Tax Could be a Major Buzzkill for Sanctioned Cannabis Retailers

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