Maryland’s adult-use cannabis sales provided roughly $72.9 million in state revenue in 2024 from a 9% sales-and-use tax, but elected officials are planning to draw more cash from the industry moving forward.
Gov. Wes Moore and leaders in the state’s General Assembly announced an agreement to the fiscal 2026 budget on March 20 that included more than $1 billion in new revenue from tax increases and more than $2.3 billion in cuts to eliminate a $3.3 billion structural deficit that they blamed on “dysfunction and chaos” from the Donald Trump administration.
The $1 billion in new revenue includes increasing the cannabis tax from 9% to 12%—a 33% hike at adult-use retail—Maryland Mattersreported. This increase was included in the agreed-upon “framework” announced on March 20 and could go into effect on July 1, 2025.
Initially, on Jan. 15, Moore had proposed increasing the cannabis tax to 15% for fiscal year 2027 (starting July 1, 2026). However, the budget details for the more modest increase are still in the early stages of the legislative process and have yet to be finalized.
Since Moore released his budget proposal in January—five days before Trump was inaugurated—Maryland’s fiscal forecast has changed dramatically, the governor said during a press conference alongside legislative leads last week.
“The thing that we have seen is that the world has fundamentally changed in just the past eight weeks,” Moore said. “According to the credit rating agency [Moody’s], federal cuts pose a greater threat to Maryland than to any other state in the country. And we have seen thousands of federal employees laid off and offices nearly shuttered. The president has launched a reckless trade war with our allies, including our largest trade partners, and those tariffs could mean over a $2 billion impact on our economy and directly harm our people.”
Moore was joined by Maryland House Speaker Adrienne Jones, Maryland Senate President Bill Ferguson and other legislative leaders in the state government’s Democratic trifecta.
While the elected officials didn’t specifically mention the cannabis tax increase, they did talk about a new 3% tax on IT and data services they project will make up nearly half of the $1 billion in new tax revenues for fiscal 2026.
The budget agreement also projects that the cannabis tax hike from 9% to 12% would raise an additional $39 million in revenue, according to Maryland Matters; however, that projection is likely overstated based on current sales trends.
After Maryland launched adult-use sales in July 2023, monthly sales figures largely leveled out in the latter half of 2024, averaging $71.6 million per month, according to the Maryland Cannabis Administration.
Current trends show Maryland’s adult-use cannabis market recording roughly $900 million in annual dispensary sales moving forward: An additional three percentage points on the tax rate would generate $27 million in additional revenue based on this projection. Medical cannabis is not subject to the state’s sales-and-use tax.
From a business perspective, with 100 dispensaries in Maryland, the average store would be on the hook for an additional $270,000 in taxes each year, meaning prices could increase, driving some consumers away from the license marketplace.
Although this tax increase could hurt cannabis businesses, Moore said during the press conference that the budget agreement is “unapologetically” pro-business.
“We need to grow the economy, and we need to diversify our economy off of Washington, and we need to make Maryland more business-friendly,” the governor said. “To grow our economy, we need to ensure that this is the best place to start and run and build a business. And we’ve agreed to invest in industries of the future that will grow Maryland’s economy and create jobs, like cyber and quantum and AI. And we’ll also protect incumbent industries and sectors that [are] at the heart of our larger prosperity.”
Moore pointed out that the budget agreement was more focused on spending cuts—the largest cuts the state has made in 16 years—over tax increases to close the budget gap.
Ferguson said the budget agreement strikes a balance between fiscal responsibility and protecting the state’s core social safety net.
“We must acknowledge the tough choices that come with responsible budgeting, and under this proposal, we are cutting at least $2.3 billion to navigate economic uncertainties,” the Senate president said. “While these cuts are difficult, they are necessary to maintain fiscal stability for Maryland.”
When Maryland put a legislative-referred adult-use cannabis legalization question before voters in November 2022, the 9% sales-and-use tax rate for dispensary sales was established to coincide with the same rate that applies to alcohol sales.
Elected officials did not target alcoholic beverages in their budget agreement.
Maryland’s Governor and legislators agree to raise cannabis tax from 9% to 12%, potentially generating $39 million in additional revenue for the state budget. Read More
