Legal cannabis retailers in Washington state reported roughly $1.14 billion in sales in 2025, according to recently updated state data.
That’s a slight decline from the $1.18 billion in cannabis sales reported in 2024, according to data from the Washington state Department of Revenue.
However, that represents a 21% drop from a peak of roughly $1.4 billion in 2021 – which reflects a mature market struggling under a stack of financial pressures, according to NPR affiliate KUOW.
Why is cannabis sales revenue declining in Washington?
As in other mature West Coast markets, oversupply remains a problem in Washington.
Licensed growers produced 121,254 pounds of THC in 2017, nearly double what was sold that year, according to the Tri-Cities Area Journal of Business. But by 2023, production tripled to more than 363,000 pounds by 2023, while sales only doubled.
High taxes compound the strain created by oversupply. Washington’s 37% excise tax on retail cannabis is the highest recreational tax in the country, according to KUOW.
Combined with federal restrictions under Internal Revenue Code Section 280E, which bars state-legal operators from claiming standard business deductions, effective tax rates can climb as high as 70% for some businesses, according to Whitney Economics, as reported by the Journal of Business.
“If the tax rate, as we believe, is pushing people into the untaxed illicit marketplace, then we’ve got to look at the tax rate as one of the barriers to a safer choice,” Washington CannaBusiness Association spokesperson Aaron Pickus told KUOW.
Are Washington state cannabis taxes too high?
The illicit market continues to siphon revenue from licensed retailers. Economic analyses suggest only about half of cannabis sales in Washington are via legal channels, Pickus told KUOW.
Local bans on marijuana retailers in some counties push consumers toward unregulated sellers.
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The pressures have driven high turnover. Annual attrition among producers and processors reached 20% in 2022, compared with 7% among retailers, according to a July 2025 report from the state’s Joint Legislative Audit and Review Committee, as reported by the Journal of Business.
Federal moves to reschedule medical cannabis to Schedule III may offer little relief to Washington operators. Because the state licenses businesses through a single recreational market rather than a separate medical tier, the rescheduling likely doesn’t apply to most licensees, who remain subject to 280E.
“A lot of our colleagues are closing,” Dewey Scientific co-founder Jordan Zager told the Journal of Business. “The volume of product moving from producer to retailer has severely declined, down 60% in just a year.”
