First month of Minnesota's cannabis tax nets the state nearly $600K

Minnesota's first batch of state cannabis taxes paints the clearest picture yet of just how much money residents and visitors are spending on legal hemp-derived THC gummies and drinks: At least $6 million last month.

If July proves to have been a typical month for Minnesota's existing hemp-derived THC market, annual sales for those products could surpass $70 million — amounting to a $7 million tax revenue haul for the state each year.

The Department of Revenue told the Star Tribune it had received more than $594,000 from 571 businesses for July's sales and noted the number could rise with late filings and returns still being processed. While legal since last summer, hemp-derived THC products have just become subject to a special 10% tax included in the state's marijuana legalization law that passed this year.

All signs point to continued growth for the market.

"We're seeing a pretty large expansion," said Bob Galligan, a member of the Cannabis Beverage Association and the government and industry relations director for the Minnesota Craft Brewers Guild. "I just stopped at my local liquor store and there were probably two or three new [THC seltzer] brands that I had never heard of."

Minnesota's unique hemp-derived beverage market has been a boon for breweries and liquor stores. Of the roughly 180 breweries that are members of the Craft Brewers Guild, around 40 now make and sell THC seltzers, Galligan said.

"I can definitely say that it has saved a number of breweries from closing their doors," Galligan said.

Burning Brothers, the gluten-free brewery in St. Paul, released its THC-infused Kite Soda last year amid the initial rush to market.

"With this, we get a lot broader exposure," said Kasey Pate, lead brewer at Burning Brothers. "It's exciting. It's definitely a big change in the industry, in Minnesota in particular, and we're excited to see what comes from it."

Being able to sell THC products in liquor stores — which has been allowed since June — will allow the industry to grow and see more mainstream acceptance, she said.

"We're already in stores from Grand Marais to southern Minnesota," Pate said.

THC seltzer sales are booming at Top Ten Liquors, which has 13 stores in the Twin Cities metro area. Owner Jon Halper said he expects THC beverages to account for 10% of the liquor chain's overall sales by October.

The cannabis-infused beverages are bringing "a new group of customers" into the chain's stores, Halper said.

"Very quickly, it's become a really material part of our business," Halper said.

The state's cannabis market is expected to grow significantly once licensed marijuana dispensaries open and more types of products hit shelves in the coming years. Annual sales could reach $1.5 billion by the end of the decade, according to an analysis by the cannabis law firm Vicente.

State estimates project more than $100 million in annual cannabis tax collections when the market matures.

Marijuana flower remains the most popular type of product in states that have legalized recreational use. Last month in Michigan, buds, pre-rolls and other raw products accounted for 56% of sales.

It will likely take until early 2025 for marijuana retailers to open in Minnesota outside of tribal dispensaries, however, as the state must first set up an Office of Cannabis Management to regulate and license businesses.

Businesses that currently or intend to make and sell hemp-derived THC and CBD products need to register with the Minnesota Department of Health by Oct. 1. The registration is free and is a placeholder for the full licensing process the Office of Cannabis Management expects to roll out for low-dose edibles and drinks in 2025.