Connecticut Collected 67% More Cannabis Tax on Flat Sales. The Math Behind It Dies Oct. 1

When Ben Zachs submitted written testimony to Connecticut's Finance, Revenue and Bonding Committee this spring, he opened the way no tax memo ever does: "The TLDR; This is a great bill, but we need to update the tax from 10.75% to 10.65% to match Massachusetts." Zachs is the chief operating officer of Fine Fettle, a Connecticut-based cannabis company with 175 employees, $35 million in capital investments and operations in ten municipalities, where he says the company ranks among the largest local taxpayers. The bill he was supporting, House Bill 5109, had one job: kill the strangest cannabis tax in the country. (S1)

His testimony included a detail that explains why. "My finance team spends an extra ten hours monthly computing this tax," Zachs wrote. "If we have a discrepancy with DRS, there are tens of hours added to reconcile for both us and state employees." Customers, he added, "frequently do not understand why similar products carry very different tax amounts." (S1)

This month, the Department of Revenue Services' numbers showed what that tax has been doing at scale. Connecticut collected about $12.45 million in cannabis excise tax from January through April, up from roughly $7.44 million over the same months last year, an increase of 67%. Sales barely moved. Retailers rang up about $95.3 million in combined adult-use and medical sales through April, up 1.6%, according to CT Insider's analysis of Department of Consumer Protection data. The state's cannabis tax haul jumped two-thirds while its cannabis market stayed flat. (S2, S3)

The explanation is not a boom. It is arithmetic. Connecticut taxes adult-use cannabis by the milligram of THC rather than by the price: 0.625 cents per milligram in flower, 2.75 cents per milligram in edibles, 0.9 cents per milligram in everything else, stacked on top of the 6.35% state sales tax and a 3% municipal tax. A tax pegged to potency does not fall when prices do. And prices have collapsed: the average price per gram dropped from $12.51 in March 2024 to $7.22 in March 2026, a decline of more than 40%. Consumers are buying more product for fewer dollars, and every milligram is taxed the same as it was when the product cost nearly twice as much. On some items, Zachs says, the effective tax rate reaches 35%. (S2, S4, S3)

The fix is already law. Under Public Act 26-8, the THC-based tax dies on October 1 and is replaced by a flat 10.75% excise on a retailer's cannabis gross receipts, collected from the consumer at the register. The 6.35% sales tax and the 3% municipal tax stay. Medical cannabis is exempt from the new excise entirely. The legislature's own fiscal office scored the switch as a net revenue loss to the state of $1.9 million in fiscal 2027 and $2 million in fiscal 2028, a quiet acknowledgment of how much extra the potency formula has been extracting. (S5, S6, S4)

The potency tax had a legible logic: the stronger the product, the more the state collected, a structural lean against high-potency products. In practice, the lever bent the other way. Consumers kept reaching for stronger products regardless, and because the levy is buried inside the shelf price, most never knew that a 100-milligram pack of gummies carried $2.75 in potency tax before any other tax applied. (S2, S4, S7)

The arithmetic is easy to run from the statutory rates. An eighth of flower testing at 30% THC carries about 1,050 milligrams, which at 0.625 cents per milligram is roughly $6.56 in potency tax, the same $6.56 whether that eighth sells for $50, as it did early in the program, or for half that today. On a $25 eighth, the potency levy alone approaches 26% of the price before the 6.35% sales tax and 3% municipal tax are added, which is how the industry's 35% effective-rate figure comes about. The tax was calibrated for 2023 prices and never moved. (S2, S4)

Kebra Smith-Bolden, who owns the Lit dispensary in New Haven, hears about it at the counter anyway. "Even as the legal market has matured and retail prices have become more competitive, customers still feel the impact of Connecticut's cannabis taxes at the register," she told CT Insider. The divergence between tax collections and sales, she said, is exactly what the structure produces: "Retail prices have come down, which means consumers may be purchasing the same amount or even more product while spending fewer dollars. But because the current cannabis excise tax is based on THC content rather than the retail price, that tax doesn't necessarily decline along with the price of the product." (S2)

The dollars-versus-volume split runs through the whole market. Total sales slipped from about $293 million in 2024 to roughly $290 million in 2025, but the mix moved sharply: recreational sales grew $17.6 million while medical sales fell $21 million, the familiar pattern of patients migrating into an adult-use market with more stores and fewer hoops. Through April of this year, adult-use sales were up about 7% while medical kept sliding. (S2, S3)

Zachs frames the stakes as border math. "The current tax structure is an absolute nightmare for customers," he said. "With declining prices, but a tax based on potency, the effective tax rate can be up to 35% on certain products. This really hurts our competitive reality as a market against our neighbors and the illegal market." Massachusetts, Rhode Island and New York all use simple percentage excises, and Connecticut lawmakers this year described the Northeast's jockeying over purchase limits, potency rules and taxes as an "arms race." In his testimony, Zachs pushed to set the new rate at 10.65% specifically to match Massachusetts. The legislature kept 10.75%. The gap that remains is a tenth of a point, not thirty-five. (S2, S1)

“The current tax structure is an absolute nightmare for customers. With declining prices, but a tax based on potency, the effective tax rate can be up to 35% on certain products.”

— Ben Zachs, Chief Operating Officer, Fine Fettle

There is a counterweight worth stating plainly. The same October 1 package that flattens the tax also eliminates Connecticut's THC potency cap on concentrates, while flower stays capped at 35% and most other products at 70%. The state is removing both the price penalty on potency and the ceiling on it in the same breath, and pairing that with a wider high-potency warning-label mandate, which now covers plant material above 30% THC as well as concentrates. Advocates of the potency tax's original design lost the argument to a simpler claim: a tax consumers cannot understand, levied by a state whose legal prices trail its neighbors, mostly funds the unlicensed market next door. The industry did not win everything; the $1-per-container excise on THC beverages survived, as Hartford law firm Shipman & Goodwin noted, "despite substantial efforts from the industry to abolish it." (S4, S6)

Zachs's testimony made the broader argument bluntly. "The reality is that legalization has already happened. The toothpaste is out of the tube," he wrote. "The focus now must be on making the legal system work as well as possible." A simpler tax, he argued, "would simplify the system, lower prices for consumers, and help legal businesses compete more effectively with the illegal market," and a stronger legal market "means safer products, more compliance, and a larger tax base for the state over time." Illegal sellers, he noted, pay no taxes and follow no safety rules; if licensed stores cannot get close on price, the customers the state most wants inside the tested system keep shopping outside it. (S1)

Smith-Bolden, who testified for the replacement, puts the case in market-integrity terms. "Excessive and complicated taxation creates customer dissatisfaction, makes it harder for the regulated market to compete, and can undermine the state's goal of moving consumers into a safe, tested and regulated marketplace," she said. (S2)

1. October 1, 2026: the per-milligram THC tax is repealed and the 10.75% gross-receipts excise begins, applying to sales on or after that date; medical sales are exempt.
2. Same day: the concentrate potency cap is eliminated, THC beverage limits rise to 10 mg per container at cannabis retailers and 5 mg at package stores, and the expanded high-potency warning label takes effect.
3. The bill requires DRS to post each implementing policy at least 15 days before it takes effect, so watch the department's website through September.
4. The first revenue test comes with winter collections: the fiscal office projects the state gives up about $1.9 million in FY 2027 for a tax consumers can finally see.

One more line in the fiscal note deserves notice: alongside the rate change, the bill shifts 5% of cannabis excise collections away from the General Fund and into the state's social equity and innovation account. Connecticut is accepting slightly less cannabis revenue overall and steering more of what remains toward the equity programs the 2021 legalization law promised. Whether the flat tax actually moves shoppers back from Massachusetts, or simply makes the receipt legible, will show up first in the Department of Consumer Protection's monthly sales data this winter, the first season in which Connecticut's cannabis tax and Connecticut's cannabis prices finally move in the same direction. (S5, S2)

For Fine Fettle's finance team, the change arrives as ten hours a month it gets back. For shoppers, it arrives as a receipt where the tax finally tracks the price. Zachs did not get his tenth of a point, and Connecticut's legal ounce will still cost more than one bought over the Massachusetts line. But after October 1, for the first time since sales began, the state and its customers will at least be reading the same number. (S1, S2)

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