In Massachusetts, cannabis now generates more taxes than alcohol

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In Massachusetts, alcohol sales are not dropping. But cannabis sales are skyrocketing, so much so that for the first time since legalization in 2016, revenue from taxes on cannabis has exceeded that on alcohol.

Since the opening of cannabis stores in Massachusetts in November 2018, total sales have reached $2.54 billion, according to data from the Cannabis Control Commission.

While tax data shows that alcohol consumption is barely plummeting, the rise in cannabis use reflects changing attitudes about recreational alcohol and cannabis use.

“I think people are looking for an alternative to feel better,” Mikayla Bell, community outreach manager for NETA, one of the state’s largest cannabis retailers, told WCVB. “Often people turn to alcohol for relief. And now they’ve found another product without the hangover, without the calories.”

For the first time, excise duties on cannabis exceeded those on alcohol. Halfway through the fiscal year, the state collected $74.2 million in December 2021 compared to $51.3 million for alcohol.

Cannabis taxes in Massachusetts

Cannabis taxes in Massachusetts

The 10.75% excise tax on recreational cannabis represents only about half of the total tax revenue collected for cannabis in Massachusetts. A state sales tax of 6.25% plus a local tax of up to 3% also exists. Total tax revenue was $208 million in the last fiscal year.

According to Vivien Azer, an analyst at Cowen, an analytics agency that covers the cannabis industry, the pandemic has increased cannabis sales as people are locked down and have more disposable income, but she added that consumption trends have now started to normalize.

“Not only is the industry growing by migrating current consumers from the illicit market to the legal market. But you’re also engaging consumers who have probably tried the product once in their lifetime and then walked away from it, but now have permission to come back to it now that it’s legal,” she said.

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