Cannabis retailers - medical endorsement

Cannabis retailers with a medical endorsement are licensed by the Washington State Liquor and Cannabis Board (LCB) to sell useable cannabis, cannabis concentrates, and cannabis-infused products to consumers in Washington.

Cannabis retailers with a medical endorsement are subject to Washington taxes administered by the Department of Revenue.

Business and occupation (B&O) tax

Gross income from the sale of useable cannabis, cannabis concentrates, and cannabis-infused products to consumers is subject to the B&O tax under the Retailing classification.

Retail sales tax

Cannabis retailers must also collect and remit retail sales tax on all sales of useable cannabis, cannabis concentrates, and cannabis-infused products to consumers unless a specific exemption applies. The retail sales tax rate is based on the retailer’s business location where the customer takes delivery of the product.

• Cannabis products are not prescription drugs: Sales of cannabis do not qualify for the sales and use tax exemption for prescription drugs whether sold for recreational or medicinal purposes.
• Cannabis products are not food or food ingredients: Cannabis-infused products do not qualify for the exempt food sales deduction.
• Nonresidents must pay retail sales tax on purchases of cannabis products: Sales of cannabis to nonresidents do not qualify for the limited nonresident sales tax exemption.

Retail sales tax exemptions

The following transactions by cannabis retailers with a medical cannabis endorsement are exempt from retail sales and use tax:

• Sales and donations of compliant cannabis products as identified by the Department of Health (DOH) to customers with recognition cards.*
• Sales and donations of low-THC products (0.3% or less) to customers with recognition cards. 
• Sales of high-CBD compliant cannabis products to all consumers. 
• Sales and donations of topical, nondigestible low-THC products (0.3% or less) by certain healthcare professionals to qualifying patients.
• Cannabis and low-THC products produced by a cooperative for its members. 

*For purposes of this exemption, the DOH has determined that a “compliant cannabis product” is any cannabis product purchased by a qualifying patient with a recognition card. See DOH policy statement MMJ 21-01.

Cannabis excise tax

Generally, cannabis retailers must collect a 37% cannabis excise tax on each retail sale of useable cannabis, cannabis concentrates, and cannabis-infused products. This includes cannabis products that qualify for a sales or use tax exemption.

Starting June 6, 2024, cannabis retailers with a medical cannabis endorsement are not required to collect and pay the 37% cannabis excise tax on sales of compliant cannabis products to buyers with recognition cards. 

The 37% cannabis excise tax is not included in the total selling price for purposes of the B&O tax and retail sales tax.

LCB is the only agency authorized to accept payments for the cannabis excise tax.

For more information, see LCB’s webpage on the cannabis excise tax. If you have questions regarding this tax, contact LCB’s Customer Service Team at cannabistaxes@lcb.wa.gov or 360-664-1789.

Medical cannabis endorsements for retailers

To get a medical cannabis endorsement you will need to apply with the Liquor and Cannabis Board (LCB). You must already have a retail cannabis endorsement to apply for the medical cannabis endorsement.

References:

RCW 82.08.0281 - Exemptions – Sales of prescription drugs

RCW 82.08.0293 - Exemptions – Sales of food and food ingredients

RCW 82.08.0273 - Exemptions - Sales to nonresidents of tangible personal property, digital goods, and digital codes for use outside the state—Proof of nonresident status—Penalties.

RCW 82.08.9998 - Exemptions - Cannabis concentrates, useable cannabis, or cannabis-infused products - Products containing low amounts of THC.

RCW 82.12.9998 - Exemptions - Cannabis concentrates, useable cannabis, or cannabis-infused products - Products containing low amounts of THC.