Across the United States, cannabis legalization is reshaping regional economies. When one state legalizes cannabis while a neighbouring state maintains prohibition, consumer spending often crosses borders. This situation is becoming increasingly relevant for North Carolina and Virginia. North Carolina does not currently allow recreational cannabis sales, while Virginia has legalized adult possession and operates a regulated medical cannabis market.
This policy difference creates what economists often call a “revenue leak.” When North Carolina residents travel to Virginia to purchase cannabis products, the spending, along with tax revenue, jobs, and business activity, benefits Virginia instead of North Carolina. While precise tracking of interstate cannabis purchases is difficult, economic estimates suggest that millions of dollars in cannabis spending leave North Carolina each month. Understanding the scale of this cross-border spending helps illustrate how cannabis policy decisions can influence state revenue and regional economic activity.
Cannabis Policy Differences Between North Carolina and Virginia
The difference in the laws on cannabis in the two states greatly influences consumer behaviour. Consumers will tend to visit the closest legal market when one state has legal access to cannabis, and another does not.
Virginia’s Current Cannabis Framework
Virginia has taken several steps toward cannabis reform:
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In 2021, possession of small quantities of cannabis was legalized among adults.
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The state has a controlled dispensary system of medical cannabis.
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Recreational retail sales have been mentioned but have not yet been fully implemented.
Despite a small-scale retail system, a regulated cannabis market in Virginia already has consumers who seek legal, lab-tested products. To know more about how Virginia’s cannabis market could influence policy discussions in neighbouring states, read this article: The 300-Mile Border: How Virginia’s 2026 Retail Launch Pressures NC Lawmakers.
North Carolina’s Current Restrictions
North Carolina is still among the states that have more restrictive cannabis laws. At present:
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The possession and sales of recreational cannabis are still illegal.
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Medical cannabis legislation has been discussed in the state, but it has yet to establish a comprehensive program.
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Consumers who want to use controlled cannabis products have to travel to different states in most cases.
Since Virginia has a long border with North Carolina, it becomes one of the most convenient destinations for residents to acquire legal cannabis products. To know more about hemp-derived THC products and their legal status in the state, read this article: NC Policy: The Future of Delta‑9 Gummies in North Carolina Retail.
Estimating the Cross-Border Spending
Even though it is hard to estimate precise numbers, various market surveys offer an understanding of the size of cannabis demand among North Carolina residents. The analysis of regional cannabis consumption patterns indicates that a big share of cannabis consumed by cannabis consumers in North Carolina is not produced within the state.
Some estimates indicate that between $180 million and $280 million worth of cannabis consumed annually by North Carolina residents may come from external markets, including some of its neighbours. This indicates a large economic outflow from the state when divided into monthly expenditures.
Monthly Spending Estimates
According to these more general consumption estimates, the monthly expenditure out of the State of North Carolina that can be estimated is:
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Low estimate: approximately $15 million monthly.
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Higher estimate: approximately $23 million monthly.
All of this expenditure does not occur directly under the regulated retail system in Virginia, but Virginia is as far as North Carolina residents can legally reach. With the increase in legal cannabis retail in nearby states, a greater portion of that expenditure may be made in licensed markets.
The Tax Revenue North Carolina May Be Missing
When cannabis purchases occur in another state, the tax revenue generated by those sales stays in that state. This is among the biggest economic impacts of cross-border cannabis markets.
With a controlled market and standard tax rates of cannabis use in other states, North Carolina would have the potential to reclaim some of the funds that currently exit its borders.
Potential Monthly Tax Revenue Loss
Cannabis tax structures in legalized states often range from 15% to 30% when combining excise, sales, and local taxes.
Using an average hypothetical tax rate on the estimated range of spending would give a rough estimate of how much the revenue might change:
Monthly cannabis spending by NC residents outside the state:
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approximately $15–23 million
Estimated tax revenue at a 20% rate:
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roughly $3–4.6 million per month
Estimated annual tax revenue not captured:
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about $36–55 million per year
These are not exact fiscal estimates, but they illustrate how much revenue there could be if cannabis were purchased in North Carolina.
Economic Effects on Border Communities
There is more than just a loss of state tax revenues due to the revenue leak. The economic effects of cross-border cannabis expenditure may lead to more extensive impacts, especially in areas near the state borders.
The most prevalent effects consist of:
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Retail expansion: Cannabis dispensaries tend to locate in border counties with high out-of-state demand.
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Other consumer spending: Visitors can spend their money on food, fuel, and other products when paying cannabis visits.
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Job creation: Cannabis companies will create jobs in retail, logistics, and product production.
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Local tax advantages: Cities with dispensaries will be able to get more license fees and local taxes.
These economic impacts may become even more apparent in the North Carolina border in case Virginia eventually opens full recreational cannabis retail stores. To understand how federal tax rules affect cannabis businesses, read this article: Taxation Troubles: Why IRS Code 280E Continues to Cripple Cannabis Companies.
Future Policy Decisions and the Revenue Question
The long-term revenue leak will depend mostly on its policy options in both states. Several factors may affect the situation over the next few years.
Key factors include:
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Virginia legal cannabis retail market expansion.
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Further increase in the demand for cannabis in the Southeast.
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Medical or recreational cannabis programs may be introduced in North Carolina.
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Increased interstate competition over cannabis tax revenue.
Cross-border purchasing could further increase if Virginia opens its retail system and North Carolina maintains more restrictive laws. Conversely, when North Carolina establishes a regulated cannabis market, a large portion of the money leaving the state would return to local businesses and community revenue initiatives. To know more about recent discussions surrounding federal cannabis rescheduling, read this article: Hemp, CBD & Compliance: What Cannabis Rescheduling Means for the Legal Landscape.
Conclusion
The variation in cannabis laws between Virginia and North Carolina is already affecting where consumers spend money. It is estimated that North Carolina residents could be spending between 15 million and 23 million per month on cannabis procured outside the state, and some of this demand is carried over to neighbouring markets like Virginia.
If they made such purchases in a regulated market in North Carolina, the state could tap into millions of dollars in monthly tax revenue, as well as other economic gains, such as business and job creation. With a cannabis policy debate ongoing in the state, the cross-border spending and lost revenue issue will probably continue to play a significant role in future debates. For more insights and updates on cannabis policy and markets, visit CBHD News.