As fiscal 2020 drew to a close in June, Massachusetts marked a milestone: $122 million in tax revenue had been collected in the first two fiscal years of recreational cannabis sales.
Where has that money gone? According to a Business Journal analysis of state data, the money has supported a variety of state and local needs, from town operations to the MBTA.
The funds come from a 20% tax on recreational cannabis, implemented on all non-medical sales since the first recreational stores opened in November 2018. The tax includes a 6.25% sales tax, a 10.75% excise tax, and local option tax for cities and towns up to 3%.
Here’s a breakdown of how much in cannabis taxes has been recorded , and how that money so far has been spent.
Sales taxes: $38.16 million
Sales tax funding totaled $8.11 million in fiscal 2019 and $30.05 million in fiscal 2020, according to comptroller data released by the state. According to the Department of Revenue, sales tax from marijuana, along with regular sales tax revenue, is deposited into the state’s General Fund as well as the MBTA and School Building Authority funds.
Excise tax: $65.63 million
Excise tax revenue totaled $13.95 million in fiscal 2019, and $51.68 million in fiscal 2020, according to comptroller data. By law, excise tax revenue, along with any cannabis fines and fees, to go the Marijuana Regulation Fund. Since that fund started collecting revenue in fiscal 2018, it has collected $113 million.
According to state law, the Legislature can appropriate that funding to support the Cannabis Control Commission or five other areas, two of which focus on economic equity and initiatives to benefit people living in communities disproportionately impacted by the war on drugs. The law also allows the Legislature to allocate money to public and behavioral health, public safety and municipal police training.
Spending from the fund in fiscal 2019 and 2020, obtained through a public records request and current through July, $78.8 million has been spent to date. The vast majority of that spending — $53.8 million — was allocated to the state Division of Alcoholism Administration. Another $20.7 million was used to pay for the Cannabis Control Commission.
Local option tax – $18.28 million
As of July, 46 municipalities in Massachusetts had at least one recreational marijuana dispensary open for business, according to Cannabis Control Commission data. Those communities can collect up to a 3% local tax on recreational marijuana sales, and reported $3.89 million in local tax revenue in fiscal 2019 and $14.39 million in fiscal 2020, according to comptroller data.
There is no database of where this money goes — individual municipalities determine how the funding is spent. The Massachusetts Municipal Association said it does not track marijuana local option sales tax allocations. However, a review of one of the first towns to have recreational marijuana may provide a clue of how the funding has been allocated across the state: Northampton, where New England Treatment Access was one of the first recreational marijuana dispensaries to open in the state in November 2018, has collected just over $2.6 million in local option excise taxes since NETA opened. That funding, much like local option taxes on meals and hotels/motels, supports the city’s $100 million general fund, which supports both city departments and schools.
“Northampton does not earmark this 3% excise tax for specific spending,” said Mayor David Narkewicz in an email.
Sales tax revenue does not include the “community impact fee” that towns can collect from marijuana operators, which is another 3% fee on gross sales to mitigate costs the city or town incurs as a result of the marijuana business. In Northampton, that translated to another $2.6 million in fees, which has gone to road improvements, sidewalk construction, on-street parking, crosswalks, and more. The city is in the process of designing more road system improvements to the street adjacent to the dispensary and said it will likely use community impact fund payments to fund it.