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Virginia Marijuana Business

Virginia Cannabis
Virginia Marijuana Business

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What is the Demand for Marijuana in Virginia?

A National Survey on Drug Use and Health report released by the Substance Abuse and Mental Health Services Administration shows the demand for marijuana in Virginia between 2018 and 2019. Data from the survey reveal that the highest demand for marijuana is from Virginians within the age group of 18 to 25 years. With an estimated total of 287,000 residents, this age bracket constituted the single largest group of cannabis users in the state. Furthermore, an estimated 61,000 minors between the ages of 12 and 17 years also use marijuana. In general, the estimated population of marijuana users aged 26 years and older was 558,000, while users aged 18 years and older amounted to 885 Virginian residents. First-time users between 18 and 25 years old were estimated to be 34,000 in number, while the minors (12-17 years) were estimated to be 29,000. The report indicates a moderately high demand for marijuana in Virginia, mainly among persons aged 18 years and older.

While Virginia legalized recreational marijuana in 2021 and set a start date of January 1, 2024 for retail sales, a change in the state’s legislature has caused an indefinite hold on the implementation of Virginia’s recreational marijuana program. This outcome is likely to make Virginia’s marijuana market even smaller. As of April 2023, estimates put the number of patients in the state’s medical marijuana program at around 55,000. This is much lower than initial projections and the sizes of the medical cannabis programs of comparable states. There is evidence to suggest Virginia residents are crossing into neighboring states for their marijuana needs. For example, in March 2023, over 1,200 patients from Virginia visited Washington DC dispensaries.

How is Marijuana Taxed in Virginia?

The Senate Bill 1406/House Bill 2312 proposed a 21% statewide tax rate on retail sales and use of the marijuana flower. When combined with the existing state sales tax of 5.3% and the local tax (between 3% to 6%), it would bring the total potential levy to almost 30%. The state plans to tax other marijuana products, such as edibles and higher potency products, at higher rates when commercialization begins in earnest.

Meanwhile, there are no special taxes on medical marijuana in cannabis. However, patients should expect to pay the statewide sales tax of 5.3% on their medical marijuana purchases.

The Virginia Joint Legislative Audit and Review Commission recommended that the collection of marijuana tax should be vested on the Virginia Cannabis Control Authority, the cannabis primary regulatory agency, but this is yet to be implemented. Taxation would include different levels based on the type of product.

Proceeds from cannabis tax will be divided four ways;

40% to pre-K programs for low-income families
30% to social equity programs
25% to substance abuse prevention and treatment programs, and the remaining
5% to public health programs in the state

The proceeds will be administered through the Cannabis Equity Reinvestment Fund (the "Fund) to support the communities that have been disproportionately impacted by drug law enforcement. This will be done through scholarships and vocational resources, grants, and business loans to support workforce development and job training, and contribute to the Virginia Indigent Defense Commission.

What is the Agency Taxing Marijuana Business in Virginia?

The Virginia Department of Taxation is the state's leading tax administration agency. It is responsible for the generation and collection of government tax revenue. It collects most of the general fund revenues for the Commonwealth through the various taxes imposed by the state. Some of these are Individual Income Tax, Corporate Income Tax, and Retail Sales and Use Tax, under which marijuana is taxed in Virginia. This revenue funds critical government services, including education, health, and human services, and public safety. In 2020, Virginia Tax collected more than $37.4 billion in revenue.

The Virginia Department of Taxation functions through nine operational units to ensure ethical and efficient administration of the taxes collected by the state. The units are: