Washington State Eliminates Medical Cannabis Taxation

In November 2012, Washington voters approved the production, processing, and retail sales of recreational cannabis within Washington state under what is known as Initiative 502 (“I-502”). Washington state then provided a regulatory framework for how the legalization of recreational cannabis production, processing, and retail sales would be regulated under what would become the Washington State Liquor and Cannabis Board (“LCB”).

Washington State’s unfair taxation of medical cannabis

The LCB is tasked with reviewing, approving, regulating, and monitoring cannabis licenses within Washington state. The LCB is also tasked with administering and collecting excise taxes concerning the retail sale of cannabis concentrates, useable cannabis, and cannabis-infused products within the state. Cannabis sales in Washington state are currently taxed at a rate of 37%, in addition to the general state and local sales and use taxes. Qualifying patients and providers are exempt from the general and local sales and use taxes on the sale of cannabis products compliant with the Department of Health (“DOH”) but have continued to be subject to the 37% excise tax, until now.

HB 1453 seeks to alleviate the unfair tax burden on medical cannabis patients and providers

On March 6, 2024, the Washington Senate passed HB 1453 which will provide an exemption from the 37% excise tax for medical cannabis patients and designated providers. The bill now waits for signatures and executive action to become law. First introduced in 2023, HB 1453 sought to harmonize the existing medical exemptions from general sales and use taxes with the 37% excise tax on cannabis sales.

Medical cannabis patients and providers face a significant financial burden when patients and providers are unfairly taxed the same as recreational consumers.

Primarily, medical cannabis is not recreational or a luxury, but a necessity for many people who suffer from chronic pain, epilepsy, PTSD, and other conditions. Medical cannabis is often the only effective treatment that allows them to function and improve their quality of life. Medical cannabis patients and providers must already jump through additional regulatory hoops to stay compliant with the LCB and the DOH and the imposition of additional taxes only exacerbates this hardship. Medical cannabis patients and providers follow strict rules and guidelines to access the medicine not required by recreational cannabis users and providers, and it is unjust to further penalize those medical patients and providers.

Medical cannabis is already expensive and not covered by insurance or public health programs. Adding a tax aimed at recreational sales on top of that makes it even more unaffordable for many patients who are already struggling financially. This can force them to reduce their dosage, switch to cheaper but less effective products, or even turn to the recreational market which does not have the same DOH requirements and compliance standards. Taxing medical cannabis patients the same as recreational consumers is a form of discrimination that harms their health and well-being. It also goes against the principle of harm reduction, which is one basis of medical cannabis legalization policy.

Recognizing medical cannabis as an essential medicine

Washington lawmakers have finally acknowledged that medical cannabis should be treated as a medicine, not a commodity, and exempted from the 37% excise tax along with the current exemption from general and local sales and use taxes. The passage of HB 1453 marks a significant step towards alleviating the unjust financial burden on patients and providers. If signed into law by Governor Jay Inslee, HB 1453 will take effect ninety (90) days after the adjournment of the current legislative session and will provide medical cannabis patients and providers a much-needed tax exemption for their medicine.