How Cannabis Is Taxed in Alaska

Alaska's cannabis tax structure is unlike that of any other legal state. Rather than taxing retail purchases at the register, Alaska levies an excise tax at the point of cultivation — when cannabis is transferred from a cultivator to another licensed facility. There is no statewide sales tax in Alaska on any product, including cannabis. This means the state's entire cannabis tax revenue comes from cultivator-level excise collections.

State Excise Tax Rates

The tax is collected when a cultivator transfers cannabis to a retail store, manufacturer, or other licensed facility. The cultivator is responsible for remitting the tax to the Alaska Department of Revenue. Because the tax is embedded in the wholesale price, consumers do not see it as a separate line item on their receipt — it is built into the retail price.

No Statewide Sales Tax

Alaska is one of only five states with no statewide sales tax. This means there is no additional state tax at the point of purchase. However, many Alaska municipalities levy their own local cannabis taxes, typically around 5%:

• Anchorage: 5% local cannabis tax
• Fairbanks: 5% local cannabis tax
• Mat-Su Borough: 5% local cannabis tax
• Ketchikan: 5% local cannabis tax
• Other municipalities vary from 0% to 5%

In a municipality with a 5% local tax, a $50 cannabis purchase would cost $52.50 at the register — the $50 product price (which already includes the cultivator excise tax built into the wholesale cost) plus $2.50 in local tax.

Where the Revenue Goes

Alaska's cannabis excise tax revenue is distributed according to a specific formula established by Ballot Measure 2:

• 50% — Recidivism reduction programs: The largest share funds programs aimed at reducing repeat criminal behavior, including drug treatment, re-entry services, and criminal justice reform initiatives
• 25% — Education: One quarter of cannabis tax revenue is directed to state education programs
• 25% — General fund: The remaining quarter flows to the state's general fund for discretionary spending

Annual Revenue

Alaska's cannabis excise tax generates approximately $25 to $30 million per year in state revenue. While this is modest compared to larger-population states like California or Colorado, it represents a significant and growing contribution to Alaska's state budget — particularly for recidivism reduction programs that receive half of all cannabis tax collections.

Local municipal cannabis taxes generate additional revenue that stays in the communities where cannabis businesses operate, funding local services and infrastructure.

How Alaska Compares

Alaska's tax structure is distinctive in several ways:

• Weight-based, not percentage-based: Most states tax cannabis as a percentage of the retail price (e.g., Colorado's 15%, Washington's 37%). Alaska taxes by weight at the cultivation level, which means the effective tax rate decreases as retail prices rise and increases as retail prices fall.
• No retail tax: Alaska is the only legal cannabis state with no retail-level tax (neither state sales tax nor a separate cannabis excise at the register)
• Cultivator bears the burden: The tax falls directly on cultivators, who must manage cash flow to cover excise payments before receiving retail revenue

The Tax Reform Debate

Alaska's cultivation-level excise tax has been the subject of ongoing reform efforts. Industry advocates argue that the weight-based tax creates cash flow challenges for cultivators and does not scale well with market conditions. Multiple bills have been introduced to shift to a retail-level percentage tax:

• HB 91: Proposed replacing the $50/oz flower excise tax with a 6% retail tax
• HB 94 / SB 73: Companion tax reform bills with MCB support (the Board sent a support letter in February 2025)

All tax reform bills have stalled in the Finance Committee as of March 2026. The core debate centers on whether a retail percentage tax would generate comparable revenue while easing the burden on cultivators. For more details, see our Recent Legislation page.

Alaska levies a cultivation-level excise tax of $50/oz flower, $25/oz immature bud, $15/oz trim, and $1/clone. Revenue is split: 50% recidivism reduction, 25% education, 25% general fund. Total annual revenue is approximately $25–30 million.

Alaska Department of Revenue & AS 17.38