Marijuana sales tax revenue has steadily declined in Colorado over the past five years as more states have implemented legalization and intoxicating hemp products have grown in popularity, state officials say in a new report. However, cannabis brings in more tax dollars than alcohol or cigarettes.
In a memo to the nonpartisan Legislative Council of the Colorado legislature, staff “wanted to answer common questions about how marijuana industry revenues fit into Colorado’s state budget.” That includes $231.1 million in cannabis collected by the state in fiscal year 2024-25.
Adult marijuana is taxed at three levels in Colorado: a 15 percent excise tax, a 15 percent sales excise tax, and a 2.9 percent general state sales tax. As one of the first states to legalize recreational marijuana, Colorado’s revenue from such sales “grew steadily over the first eight years of legalization, reaching $424.4 million in FY 2020-21.”
After that, however, “revenues fell for the first time in 2021-22, and have declined every year,” the Legislative Council said. “Marijuana tax revenue fell to $231.1 million in FY 2024-25, 45.5 percent below the peak in FY 2020-21.”
It is remarkable notice He says the decline in marijuana tax revenue in recent years “has been largely due to low prices and a drop in demand as other states across the country legalize marijuana, and alternatives like intoxicating hemp become more available.”
Gov. Jared Polis (D), a longtime champion of cannabis reform, noted the potential economic impact of expanding legalization, He hoped states like Texas would continue to stave off the problem by scoffing so Colorado could continue to collect marijuana tourism dollars.
Texas may remain a prohibitionist state, but cannabis is now legal for adults in almost half of US states, a broader shift. has obviously contributed to the decrease in income.
But the new report also says the rise of intoxicating hemp products is diverting tax dollars. Whether the federal ban on such products changes when it takes effect in November remains to be seen.
Even as statewide legalization expanded and consumer demand increased in the hemp market, however, the Legislative Council released data comparing marijuana to other vices, including alcohol and cigarettes.
In fiscal year 2024-25, marijuana sales generated more tax revenue than alcohol ($54.3 million), tobacco products ($68.2 million), nicotine products ($91.6 million) and cigarettes ($213.9 million).
Until then, surveys have consistently found this More and more Americans are choosing marijuana and cannabis-infused drinks over alcohol and cigarettes.
Meanwhile, only in 2025, Colorado saw more than $1 billion in marijuana sales, a milestone the governor announced in December. And while the Legislative Council attributed part of the decline in cannabis sales to the sale of intoxicating hemp products, Polis also said recently. The pending federal ban will “stifle growth and innovation” in the market.
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Meanwhile, the governor said that last week his state did not have to join a lawsuit supporting a federal ban on the possession of guns by people who use marijuana that’s now before the US Supreme Court, and he personally opposes the state attorney general’s “legal position on it.”