Dispensaries say cannabis tax hike could blow customers — and profits — away

Arin Goold’s cannabis retail business will likely feel the pain of a tax increase set to take effect next month.

“Just to prevent people from walking out the door and going somewhere else, which no one can afford right now, we’re probably going to have to eat that ourselves,” said Goold, owner of Mama and the Girls, which has stores in Albuquerque and Santa Fe. “That’s just going to have to come out of our profit margin, which is already, for everybody, razor thin.”

The cannabis excise tax included in the 2021 Cannabis Regulation Act, which legalized recreational marijuana use, is set to increase incrementally starting in July. The rate is currently 12% — where it has stood since sales started in 2022 — and increases to 13% on July 1. The increases continue until eventually hitting 18% in 2030.

For those like Goold, the increase poses financial threats for family-owned and small cannabis businesses.

Goold describes her dispensary as “middle class” in terms of income, earning between $45,000 and $60,000 per month. While higher than most smaller businesses, admittedly, there was more to running a cannabis shop than she thought.

“Once you’re in it, then you realize, ‘Whoa, everything costs more,’” she said. “You got that green (excise) tax added on that makes it sound like a lot, (but) it’s taking every penny you have just to keep it open.”

The cannabis industry is more difficult to succeed in than most, according to Anthony Luna, co-owner of Luna Leaf. He started the company in 2023 and has been met with challenges since — namely, a saturated market where marijuana shops fight for a limited number of customers — despite the business’ slow and steady growth.

In an effort to retain customers, Luna said his shop will also have to “eat the cost” and offer reduced prices once the tax increases. He estimates that if the business makes $2 million this year, it will lose $20,000 in net profit. The dispensary would need 40 or more consumers spending an average of $45 per month to make up for this year’s deficit — and another 160 shoppers per month by 2030.

“(It) just isn’t sustainable, especially when we’ve seen the overall price compression trajectory on top of that,” Luna said. “I really think they will just end up losing more overall revenue in the long run, like other states have already seen.”

WeedMart co-owner David MacNeil described it as a lingering fear of losing clientele to large dispensary chains because they don’t want to, or can’t, pay the increases.

“The 1% keeps adding up: the 1% on eggs, the 1% on gas, the 1% on weed,” MacNeil said. “It all boils down to the more we tax any product, the less people spend.”

Cannabis experts, like Matt Kennicott, worry the increase in prices may also drive consumers to the illicit market to “find what they need for a lot cheaper.”

The tax rate increase is set in law, and the New Mexico Regulation and Licensing Department, which oversees the Cannabis Control Division, doesn’t have the authority to change the rates. The state Taxation and Revenue Department collects the money generated from cannabis excise taxes.

The CCD cannot speculate about what the increase may do to sales, RLD spokesperson Andrea Brown said.

One legislator did make an effort this year to stall the incremental tax increases. But the bill, sponsored by Sen. Katy Duhigg, D-Albuquerque, never received a committee hearing during the 2025 legislative session.

Ben Lewinger, former executive director of the New Mexico Cannabis Chamber of Commerce, said legislators thought it would’ve been difficult to halt the increase by July anyway, as it was already accounted for in the fiscal year 2026 budget.

He said the chamber plans to advocate for tax rate decreases in next year’s 30-day session, aiming to eventually lower it to 10%. Duhigg didn’t immediately respond to an inquiry from the Journal on whether she plans to sponsor such legislation.

“New Mexico right now, with that 12 or 13%, we’re still right in the middle. We’re still right in that sweet spot of what the average consumer would pay,” Lewinger said. “But if we keep increasing, we’re going to move out of that sweet spot.”