New Jersey Lowers Medical Cannabis Sales Tax

The move is the first step in phasing out the state’s MMJ sales tax.

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July 16, 2020

The New Jersey Treasury Division of Taxation recently announced that, effective July 1, sales tax on medical marijuana is reduced to 4% from the previous 6.625% sales tax rate (the rate imposed under the state’s “Sales and Use Tax Act”). The tax reduction is the first of three scheduled tax reductions designed to eliminate the sales tax on medical cannabis sales in the Garden State.  

The 4% sales tax rate will apply through June 30, 2021, when the tax rate will be reduced to 2% until June 30, 2022. Then, effective July 1, 2022, medical marijuana sales will not be taxed.

The tax reductions resulted from the passage of the Jake Honig Compassionate Use Medical [Marijuana] Cannabis Act, named after the late Jake Honig, “a 7-year-old from Howell for whom medical marijuana provided the only relief from an inoperable brain tumor,” according to a recent New Jersey Herald article. Gov. Phil Murphy signed the act into law July 2, 2019, “to dramatically reform New Jersey’s Medicinal Marijuana Program (MMP) and expand patient access to medical marijuana,” according to a statement from the governor’s office.

“Activists have decried the policy of instituting any tax on medical marijuana purchases as ‘criminal,’ since over-the-counter and prescription medicines at traditional pharmacies are exempt from New Jersey sales tax,” the NJ Herald reported.

The Herald article cited comments made by Sen. Robert Singer in 2019, as the bill was headed for a vote: “How dare we use the term ‘medical’ and charge poor people and working people and families sales tax on something that helps them feel better.”

According to the act, municipalities may adopt ordinances to impost a “transfer tax,” not to exceed two percent of the medical cannabis price, on medical cannabis sales made at local dispensaries. 

The act made other statutory changes to New Jersey’s medical marijuana program, including:

  • Extending the patient certification period from 90 days to one year and authorizing “health care practitioners to issue up to a one-year supply,” which was designed to “reduce the frequency of [medical office] visits and decrease costs for patients”;
  • Allowing adults to purchase edibles, which were previously “only authorized for patients who are minors”; and   
  • Establishing a Cannabis Regulatory Commission “in but not of the Department of the Treasury to assume responsibility over the medical marijuana program. The Commission consists of five members appointed by the Governor.”
(The Cannabis Regulatory Commission will also oversee the adult-use cannabis program if the state constitutional amendment being voted on by NJ residents passes in the November election.)