Maryland lawmakers have passed a significant tax reform that will impact the state’s growing adult-use cannabis industry. As part of Governor Wes Moore’s fiscal plan, approved by the General Assembly earlier this month, the state will increase its cannabis excise tax from 9% to 13% over the next five years. The move has sparked a mix of reactions from dispensary owners, consumers, and industry stakeholders.
The legislation, known as the BRFA of 2025 (Budget Reconciliation and Financing Act), raises the cannabis excise tax in three phases: increasing it to 11% in July 2025, 12% in 2027, and ultimately 13% by July 2028. The tax applies to recreational cannabis sales and is separate from the standard 6% state sales tax already imposed on retail purchases.
The tax hike is part of a broader strategy to address Maryland’s looming budget shortfall and to fund public education, infrastructure, and community reinvestment programs supported by cannabis revenues. According to the Maryland Department of Legislative Services, the tax increase could generate tens of millions in additional revenue annually once fully implemented.
For cannabis dispensaries, however, the change presents a challenging balancing act.
“Margins in cannabis retail are already tight due to compliance costs, licensing fees, and competition with the illicit market,” said Rachel Henderson, co-owner of Greenhouse Remedies in Baltimore. “Raising taxes risks pushing some consumers back to unregulated sources where prices are lower.”
Dispensary operators also fear that the higher tax burden could strain customer loyalty and affect sales volume. Many worry that small, independently owned dispensaries may struggle to stay competitive compared to vertically integrated companies that control cultivation, manufacturing, and retail.
Industry advocacy groups, such as the Maryland Cannabis Industry Association (MCIA), are urging lawmakers to reconsider or implement tax relief measures for small operators. “We’re not opposed to funding education and community programs through cannabis,” said MCIA spokesperson David Berman, “but this should be done without jeopardizing the viability of the businesses that make the system work.”
Despite concerns, state officials argue the gradual rollout of the tax increase gives the industry time to adjust. Supporters of the legislation also note that Maryland’s cannabis tax rate remains lower than other adult-use markets such as California (15%) and Illinois (up to 25% depending on THC content).
Maryland legalized adult-use cannabis in July 2023, and in its first year, the market exceeded $700 million in total cannabis sales, according to the Maryland Cannabis Administration (MCA). Nearly 40% of that came from recreational purchases. The state currently operates under a framework designed to support social equity, licensing new minority-owned businesses and investing in disproportionately impacted communities.
Looking forward, dispensaries will need to adapt by revisiting pricing strategies, improving customer experience, and possibly expanding into ancillary services. As Maryland navigates this next phase of cannabis regulation, industry players and policymakers alike will be watching closely to gauge the economic and social impact of the tax change.