Connecticut Cannabis Tax Guide: Updated 8/1/2025

Updated July 1, 2025

Key Points

• Three taxes on recreational cannabis:
  1. Potency‑based excise tax (per mg THC, varies by product type)
  2. Municipal cannabis tax (3% of retail price, statewide)
  3. State sales tax (6.35% of retail price)
• Medical cannabis is exempt from the excise and municipal taxes but is subject to the 6.35% state sales tax.
• State § 280E decoupling (effective January 1 , 2023) allows cannabis businesses to deduct ordinary operating expenses on Connecticut tax returns, projecting $6.2 million in state‑level industry savings for FY 2025.
• Monthly electronic filing & payment is required through myconneCT by the last day of the month following each reporting period; late filings incur penalties, interest, and potential license sanctions.

1. Connecticut’s Decoupling from § 280E

Effective: January 1, 2023: Connecticut law now permits licensed cannabis businesses to deduct ordinary and necessary business expenses (rent, payroll, utilities) on state personal or corporate income tax returns, despite federal § 280E disallowance.

Projected Savings: Approximately $6.2 million in industry relief for FY 2025.

2. Tax Components on Recreational Sales

A. Potency‑Based Excise Tax

Applies to: Recreational cannabis retailers, hybrid retailers, and micro‑cultivators selling at retail.
Medical cannabis: Fully exempt.

B. State Sales Tax

• Flat 6.35% on the retail price of all cannabis sales (recreational and medical).

C. Municipal Cannabis Tax

• Flat 3% of the original retail price, remitted to the municipality on recreational sales.
• Medical sales: Exempt.

Example Calculation (2025)

For a recreational edible with:

• Base retail price: $30.00
• THC content: 100 mg

1. Excise tax = 100 mg × $0.0275 = $2.75
2. Taxable base remains the $30.00 original price
3. State sales tax = 6.35% × $30.00 = $1.91
4. Municipal tax = 3% × $30.00 = $0.90
5. Subtotal = $30.00 + $1.91 + $0.90 = $32.81
6. Total due = $32.81 + $2.75 = $35.56

3. Medical Cannabis Sales

• Exempt from potency‑based excise and municipal taxes.
• Subject to the 6.35% state sales tax only.

4. Filing & Payment

• Frequency: Monthly, regardless of sales volume.
• Due date: Last day of the month following the reporting period.
• Method: Electronically file and pay via myconneCT.
• Zero‑sales: Filings are still required.
• Quarterly option: Not available; cannabis taxes must be filed monthly.

Required Schedules

1. Schedule A: Plant material
2. Schedule B: Edible products
3. Schedule C: Other products (vapes, concentrates)

Late Filing & Penalties

• Interest: 1% per month on unpaid tax.
• Penalty: 25% of unpaid tax or $250, whichever is greater.
• Enforcement: Persistent noncompliance may trigger DRS or DCP license actions, including suspension or revocation.

5. Audit Focus Areas

• Accurate reporting of THC content (mg).
• Complete remittance of excise, sales, and municipal taxes on recreational sales.
• Timely electronic filing and payment.

6. Key Trade Associations

• Connecticut Cannabis Chamber of Commerce advocacy, networking, and legislative updates
• National Cannabis Industry Association (NCIA): national advocacy, social equity, and education
• Minority Cannabis Business Association (MCBA): support, advocacy, and networking for minority-owned cannabis businesses
• Connecticut Hemp Association cultivation standards, research, and policy support

7. Government Contacts

8. Financial Calendar

Disclaimer: This guide is for informational purposes only. Always consult a qualified tax professional or the Connecticut Department of Revenue Services before making any business, tax, or compliance decisions.