Greed, Taxes, and $60 Eighths: What Factors Influence the Price of Your Weed?

Posted 03/27/2024

Previously, I have been outspoken about my tendency to gawk at dispensary prices in Chicago, but rightfully so. Chicago dispensary goers pay some of the highest prices for their weed in the country.₁ This fact was one of the reasons I started the Bud Breakdown. Previously, I have covered the high taxes in Illinois and Chicago, however, taxes are only one of many factors that are influencing the cost of weed in Illinois and the rest of the country. Green Rose Dispensary in River North will charge $60 on average for an eighth of raw flower before any taxes. Right across the border in Michigan, for contrast, will sell whole ounces of raw flower averaging $100. Clearly, there are more factors inflating the local dispensary weed prices. In this article, I wanted to build a comprehensive guide on each and every factor that might influence the weed you buy, legally or otherwise. After some research, I have narrowed these factors down to 9; grow costs, testing, processing and packaging, transportation, quality, rarity, supply and demand, brand markups, and, of course, taxes.

Grow Costs

The first and most basic influence on the price of your pot is the grow location and medium. While weed does proverbially “grow on trees”, there are many different methods to grow cannabis with differing expenses, grow times, yields, and resulting quality. At the broadest level, all Cannabis grow operations can be separated into two categories; indoor and outdoor. One of the cheapest, and simplest methods is to grow cannabis outdoors using natural light and soil. Outdoor grows usually benefit from larger spaces to grow larger plants. The main advantage to this method is the cheaper price of producing large quantities of weed compared to indoor grows. The downside of this method is the inability to control many factors including temperature, rainfall, general outdoor contaminates, sunlight, and harvest rate. It can become more difficult to control possible pests in outdoor grows compared to indoor grows. Another downside is the generally inferior quality of outdoor grows compared to indoor. The slightly lower quality, and cheaper price of outdoor pot makes it ideal for edible and tincture production.

Pot grown indoors, on the other hand, enjoys the benefits of total control of the grow environment at an extra cost to growers. Every single need of the plant needs to be met artificially including lighting, water, nutrients, humidity, and pest control. These costs can certainly add up. Infamously, indoor grow operations are also extreme power consumers₂, with most of the electricity cost attributed to lighting and other automated operations such as watering, feeding, temperature and humidity moderation, ect. For stoners, this extra cost is worth it because of the high quality and potency of indoor grows. One of the key reasons for the difference in quality is indoor grows can create almost perfect growing conditions. The growth of indoor pot will never be hampered by a “cloudy day” or damaging storms. In fact, indoor grows can be exposed to unnaturally high quantities of C02 and light and can be pumped with unnaturally high quantities of nutrients to create extremely productive and potent pot plants that would be almost impossible to grow outdoors. The superior quality of pot grown indoors can also be attributed to a cleaner and better controlled environment indoors. This allows for better pest control and less environmental contaminants.

Indoor and outdoor grows can be further broken down into different growing mediums. The growing medium is the type of substance that provides the structure and nutrients to the roots. This can also have an effect on the overall grow cost. There are too many types of grow mediums to entirely list, especially considering new techniques being developed by experimental growers. However the most popular mediums include hydroponics, aeroponics, natural soil, clay pebbles, perlite, ect.

The smallest subcategory of grow costs are what I call the grow techniques. These are the vast amount of other decisions a grower might make that could alter the grow costs. This can be anything from the cost to power speakers playing classical music to the plants (hey, some growers swear by it), to decisions on lighting type and intensity. Just as regional chefs might have slightly different takes on the same dish, there is not necessarily a standard way to grow pot.

Testing

Testing is a ubiquitous requirement in all states with any kind of legalized Marijuana. Testing is meant to ensure products are free from contaminants, labeled with the correct levels of cannabinoids, terpenes, and other natural elements that affect the overall high. Testing is meant to protect consumers and patients from mislabeled and contaminated cannabis products and is generally viewed as a necessary expense. It is an expense, however, and one that will ultimately be passed on to the consumer/patient and therefore needs to be on this list.

Notably the cost of testing does not apply to weed grown illicitly for the black market. This is a factor that can give black market weed an edge. Is it more risky to consume untested pot over tested pot? Of course, but it's a risk seasoned pot users have likely taken many times before.

Processing and Packaging

Harvesting and processing cannabis can be laborious and time consuming, and therefore costly. Harvested cannabis needs to be cut, hung to dry, trimmed, stored and “burped” to release moisture, sealed and cured for up to 8 weeks₃. Edibles, tinctures, drinks, concentrates, carts, ect will all require more processing and therefore will require even more time, materials, and labor, and money.

Your weed needs to be sold in some sort of container whether you buy it from a dispensary or just “your guy”. While a ziplock back might suffice for a black market dealer, weed sold legally needs to be packaged and labeled according to state law. Packaging cannabis can cost time, labor, and perhaps a large investment in packaging machinery and materials. With no regard to regulation, packaging is another way that black market dealers can save money and gain an edge on costs over state-sanction dispensaries.

Transportation

Transportation costs may be easy to overlook for some. Since legal cannabis cannot be transferred across state lines according to federal law even if the neighboring state also has legalized cannabis, each state's legal cannabis market is mostly local, however the cost of transportation still must be included in this list. Moving cannabis products to dispensaries and consumers requires time, money, labor, and energy.

Black market cannabis need not concern itself with federal law, however and transporting weed across state lines is a common occurrence in the black market. Black market dealers have the freedom to choose from a variety of cannabis sources from out of state growers, to legal markets in other states that might have cheaper weed or more relaxed cannabis laws. Many black market dealers also continue to utilize the mail due to its low cost and relative anonymity₄. The wider range of options for sourcing and transporting pot is another cost advantage that can be gained by the black market over the legal one.

Quality

Another influence on the price of weed that applies to the legal and illegal industry is quality. It doesn't matter if it's from a dispensary or a dealer, their higher quality weed is going to be more expensive than their lower quality weed. Influences on the perceived quality of cannabis include THC/cannabinoid potency, “nug” size, harshness, color, and even smell.

Rarity

Just as a small batch whisky can fetch high prices due to their unique attributes and rarity, the same idea can be applied to weed products. Small batch cannabis is an emerging part of the industry offering users exclusive (and very expensive) experiences. Customers have been known to willingly pay $1500+/ounce for some small batch cannabis brands₅. Interestingly, there is not even an exact definition for the term “small batch cannabis” yet. After asking a number of cannabis growers and others involved in the industry, High Times came up with a variety of definitions depending on who was asked. Examples of definitions included commercial grows under a 100 lights, under 14 lights, under a 15 lb harvest. Some insist that “small batch” weed has to be grown organically even though this has nothing to do with batch size. Some small batch growers have unique identifiers like No Till Hank Hill, a small batch grower out of Nevada who was also interviewed by High Times. He explains, “I’m particular about how I package my jars. When you open it up, you’re gonna have that nice beautiful top cola right at the top of the jar and as you go down, you’re gonna have the shoulders, not the lowers or the bottoms, but you’ll have those nice dense shoulders. Then at the very bottom, you have a gram or two of some smalls, but it’s good smalls that are very nice and dense.” Small batch cannabis is and will remain niche, however it illustrates how rarity can have an effect on the overall price of your bud.

Supply and Demand

The well-known economics of supply and demand applies to anything being sold, not only cannabis. It is necessary for this list, however, to talk about how cannabis droughts and surpluses can have major impacts on the price of pot, especially in the more localized state-legal markets. State-laws, especially those on the licensing of commercial growers and retailers can have one of the largest impacts on a state’s supply of cannabis. Since state-legal cannabis cannot be legally transported across state lines, and all dispensary cannabis must come from licensed growers, the accessibility of state licenses will have a major impact on the local legal weed supply. State law-makers also need to consider the accessibility of entering the cannabis market during the writing of cannabis laws. There is a motivation to keep the cannabis industry somewhat accessible for small-time mom & pop growers/dispensary owners and traditionally disenfranchised groups.

In a classic weed-industry case-study, the state of Oregon considered market accessibility over market stability when they issued no limits on the overall number of state growers licenses and also made the application process extremely affordable compared to the 2 other west-coast states, Washington and California. Oregon also chose not to impose minimum dispensary prices. When the legal market opened, an immediate weed surplus plagued the early days. The price of weed plunged and many producers would go out of business with nobody to buy their weed. Many would illegally sell their pot to the black market to help cut losses. In dispensaries, weed was selling for as low as $1/gram. The lax laws continue to pose challenges for those trying to make it in the Oregon weed industry.

Illinois is a great example of the opposite approach in market accessibility than Oregon, and it is one of the biggest reasons Chicago dispensary prices are as (frustratingly) high as they are. The barriers to get into the cannabis industry in Illinois are simply much higher than in oregon. It takes more capital and requires jumping through more hoops. In spite of the social equity programs enacted in more recent years, aimed at helping those in communities of Chicago most negatively affected by the effects of the war on drugs, many argue that the barriers to enter the cannabis industry in Illinois and Chicago are still too high₆. The following list tries to simplify the process to open an Illinois dispensary.₇

Dispensary Application Steps

Meet the Eligibility Requirements: Applicants must be at least 21 years old and must have been an Illinois resident for at least two years.
Obtain a Dispensary License: Apply for a dispensary license through the Illinois Department of Financial and Professional Regulation. There are several requirements and fees associated with this step, including a non-refundable application fee.
Secure a Location: Identify and secure a suitable location for the dispensary that meets all the requirements set by the state and local zoning regulations.
Build-out and Security: Prepare the dispensary space to meet all state and local regulations, including installing a security system and surveillance equipment.
Hire Staff: Hire and train employees, including a dispensary manager and security personnel.
Obtain Products and Establish Relationships with Suppliers: Establish relationships with licensed growers and manufacturers to ensure a steady product supply.
Pass Inspection and Obtain Approval: The dispensary will undergo an inspection to ensure compliance with all state and local regulations. If approved, the dispensary will be issued a permit to operate.
Open for Business: Once the permit is issued, the dispensary can officially open for business and start serving customers.

Even if you have the capital, Illinois only issues a limited number of licenses. As of June, 2023, only 136 adult-use dispensaries were operational in illinois₈. Commercial Cannabis Cultivators in the state also face a similar limited licensing issue. This creates less competition and less supply, ultimately causing prices to go up.

Brand Markups

Just as in the clothing industry, some Cannabis brands market themselves as ultra-premium, even if their products are materially not that different from a cheaper brand. There is a real psychological phenomenon happening when we perceive things that cost more as better. The same reason Apple gets away with charging $20 for a microfiber cloth, or $700 for a set of desktop wheels, some weed brands might charge extra just to help their products FEEL more premium.

Taxes (of course)

Last, but not least, the final influence on the price of your weed is, of course, taxes. State tax codes can be complicated and different from county to county, however here is a table of what you can expect from each state’s recreational use taxes₉.

Cannabis Taxation Information by State

State	Tax Details
Alaska	$50 per ounce, or proportionate part thereof
Arizona	16% excise tax
California	15% excise tax
Colorado	15% retail marijuana tax; 2.9% state sales tax
Connecticut	$0.00625 per milligram of total THC for flower products; $0.0275 per milligram of total THC for edibles; $0.009 per milligram of total THC for all other products
Delaware	15% excise tax
Illinois	10% excise tax on cannabis with THC levels at or below 35%, 25% excise tax on cannabis with THC levels above 35%, and 20% excise tax on cannabis-infused products
Maine	10% sales tax; excise tax depending on product weight
Maryland	9% sales and use tax
Massachusetts	6.25% state sales tax; 10.75% state excise tax; up to 3% local option for cities and towns
Michigan	10% excise tax and 6% sale tax
Missouri	6% retail tax
Montana	20% excise tax
Nevada	15% excise on the first wholesale sale, sales tax, and 10% retail excise tax
New Jersey	6.625% sales tax, plus a social equity excise fee of 0.33%
New Mexico	12% excise tax until July 1, 2025, which then increases by one percentage point per year, maxing out at 18% on July 1, 2030
New York	13% retail tax
Oregon	17% retail sales tax, 3% additional local tax
Rhode Island	10% state excise tax, 3% local excise tax
Vermont	14% excise tax
Virginia	21% excise tax
Washington	37% excise tax

Conclusion

In spite of the high prices, Illinois spent more than ever on legal pot in 2013 reaching $1.6 billion in adult-use sales in 2023₁. Proponents of maintaining the status quo might point out that tax revenue from adult-use sales go to good and productive causes. I would argue that since all use of cannabis is medicinal, allowing access to affordable medicine is a good cause in itself. I, and critics, also argue that the high dispensary prices will only cause Illinois residents to take their pot-money to Michigan, where an ounce of pot can cost you under $100, or back to the still-thriving black market.