Understanding Vermont's Cannabis Tax Structure

When you buy cannabis at a Vermont dispensary, you're paying more than just the sticker price. Vermont's cannabis tax structure adds approximately 20% to every recreational purchase — a mix of a cannabis-specific excise tax and the standard Vermont sales tax.

The Tax Breakdown

Vermont applies two main taxes to recreational cannabis purchases:

14% Cannabis Excise Tax: This is Vermont's cannabis-specific tax, applied on top of the base price. It was established in Act 164 and went into effect when retail sales launched in October 2022.

6% Vermont Sales Tax: Vermont's standard sales tax applies to cannabis purchases just as it would to any other retail item.

Local Option Sales Tax: Some Vermont municipalities have adopted a 1% local option sales tax. Burlington is one such municipality, meaning purchases in Burlington carry a small additional tax.

The combined effective tax rate for a Burlington recreational cannabis purchase is approximately 21%.

Medical Patients Are Exempt

Vermont Medical Cannabis Program registered patients do not pay the 14% cannabis excise tax. This makes the financial benefit of the medical program substantial — you're saving 14% on every purchase, which adds up quickly for regular consumers.

Where Does the Revenue Go?

Vermont's cannabis tax revenue is allocated by the Legislature. Current allocations direct funds toward:

• The Education Fund: A significant portion supports Vermont's public school system
• The Substance Misuse Prevention Fund: Treatment and prevention programs for substance use disorders
• Local governments: A portion returns to municipalities where cannabis is sold
• The Cannabis Control Board: Regulatory operations

How Vermont Compares

Vermont's ~20% combined cannabis tax rate is moderate compared to other legal states. Colorado taxes cannabis at up to 23%, California's effective rate can exceed 30% in some jurisdictions, and Washington State tops out around 37% including local taxes. Vermont's rate is relatively consumer-friendly, though advocates continue to push for lower taxes to help the legal market compete with the illicit market.

The Illicit Market Problem

Vermont, like all legal cannabis states, faces competition from an untaxed illicit market. High tax rates make legal cannabis more expensive than illicit cannabis, incentivizing consumers to buy outside the legal market. Vermont's relatively moderate tax rate is, in part, a deliberate strategy to keep legal cannabis competitive.