High hopes for a pot-ential pass: Bill would cap cannabis excise tax

Hopes are high this year to pass a bill capping the cannabis excise tax.

Sen. Katy Duhigg has introduced a bill in the 2025 Legislature aimed at removing incremental increases to the state’s 12% tax.

The bill, prefiled last week, follows a similar bill introduced by Duhigg in 2024, which died in committee. The Legislature starts Tuesday.

If passed, the bill would ultimately keep the state’s cannabis excise tax where it stands now, a move Duhigg and supporters say will incentivize customers to keep shopping at licensed dispensaries and combat the state’s flourishing illicit market.

“Anything we do that’s going to increase costs for the people who are following the rules and doing everything right basically puts them in a competitive disadvantage,” Duhigg, D-Albuquerque, said. “(Licensed businesses) would have to absorb this increase in tax and likely have to pass it on to their consumers. They can’t be as competitive.

“Folks in the black market, it’s a gift to them because now they have an even bigger financial advantage because they’re not dealing with those increases, and they can keep their stuff real cheap.”

The cannabis excise tax is usually added onto a customer’s purchase that is on top of a general sales tax, often referred to as a gross receipts tax. In Bernalillo County, where the sales tax hovers above 7%, the combined taxes amount to close to 20% on a purchase.

Duhigg’s bill does have some immediacy. Beginning in July, the cannabis excise tax would gradually increase by 1% through 2030 until it reaches 18%, as written in the original Cannabis Regulation Act signed by Gov. Michelle Lujan Grisham in 2021.

For Ben Lewinger, executive director of the New Mexico Cannabis Chamber of Commerce, pausing the increase in the cannabis excise tax has been “part of (the Chamber’s) legislative priorities for the last two years.”

“The reason that you want those excise taxes to be affordable is because you want to generate revenue for the state but not have those tax prices be so high that it drives people away from the regulated market,” Lewinger said.

He said New Mexico right now is “kind of in the middle” compared to other states with adult-use programs that also charge some type of cannabis tax. In Massachusetts, for example, the cannabis excise tax is about 10.75%. And in Arizona, the tax is 16% on cannabis retail sales.

“I think a 12% excise tax really took into consideration a lot of the research that was done during the governor’s working group, and it’s right at that threshold where the average consumer would pay that amount to know that their cannabis is tested for safety and that they’re buying it from a regulated market,” Lewinger said. “But if it went up a point every year, all of a sudden, we’re at the very high end of tax rates in other states.”

Duhigg said she believed last year’s version of the bill didn’t make it beyond a couple of different Senate committees because legislators focused on making corrections to the state’s Cannabis Regulation Act. Under this year’s bill, though, the cannabis excise tax would be capped at 12% “unless and until we came in and changed it.”

“It is definitely a fix that’s needed,” Duhigg said. “And I think there will be a little more urgency this year.”