In the state of Washington, sales of medical cannabis are retail sales. As such, the selling price is subject to retail sales tax. In addition, the seller is subject to the business and occupation (B&O) tax under the retailing classification. This is true even if it is sold by a medical cannabis dispensary.
Sales of medical cannabis are not eligible for the retail sales tax exemption provided for prescription drugs. RCW 82.08.0281 provides an exemption from retail sales tax for certain drugs, but only when prescribed as authorized by the laws of this state. However, cannabis is a Schedule I controlled substance and cannot be prescribed under either federal or state law in Washington.
Chapter 69.51A RCW addresses medical cannabis, but does not authorize the prescription of medical cannabis. This chapter specifically avoids authorization of a prescription by referring to “valid documentation”, which does not equate with a prescription as defined in RCW 82.08.0281(4)(a), or as provided in RCW 69.50.308 (Prescriptions). Chapter 69.51A provides that it is only intended to protect qualifying patients, designated providers, and physicians from liability, prosecution, or criminal guilt when cannabis is possessed, used, provided or authorized.
In addition, sales of cannabis-infused products (edibles, liquids, etc.) are not eligible for the retail sales tax exemption provided for food and food ingredients under RCW 82.08.0293 as these products are not "food or food ingredients." Therefore retail sales tax applies on sales of cannabis-infused products.
See our Special Notice - Sales of Medical Cannabis Remain Subject to Sales Tax (pdf)
Senate Bill (SB) 6505 [Chapter 140, Laws of 2014] clarified that marijuana, useable marijuana, and marijuana infused-products, including marijuana concentrates are not drugs for purposes of the sales tax exemption under RCW 82.08.0281 for prescription drugs. SB 6505 also clarified that marijuana, useable marijuana, and marijuana infused-products, including marijuana concentrates are not food or food ingredients for purposes of the sales tax exemption under RCW 82.08.0293 for food and food ingredients.
These clarifications do not change how sales of medical cannabis (marijuana) are taxed. Whether sold for recreational or medical purposes, all sales of cannabis are subject to retail sales tax. For more information on these clarifications, see our Special Notice: Recreational and Medical Marijuana â€“ Repeal and Clarification of Excise Tax Deductions, Exemptions, and Preferential Rates.