On Tuesday, voters legalized recreational marijuana in Michigan and medical pot in two more states, imposing relatively low taxes of 4% on retail sales in Missouri and an additional 10% excise tax on Michigan’s 6% sales tax.

Aside from contending with state tax laws, cannabis companies must also pay federal taxes even though technically their business is illegal. Marijuana companies will owe $2.8 billion in taxes to the federal government this year, according to one estimate.

Keeping marijuana taxes low benefits cannabis companies such as U.S.-based Curaleaf Holdings, Inc. (CURA.CN, LDVTF). It’s one of the largest cannabis retailers in the U.S. and listed on the Canadian Securities Exchange last week to expand its business. Curaleaf owns 28 dispensaries, 12 cultivation and 9 processing sites in 12 U.S. states.

‘The players gladly pay their taxes’

Curaleaf’s CEO Joe Lusardi says low taxes on marijuana sales puts the cannabis industry in a better position to compete with the black market.

“One of the things that we’ve learned about legalization in America, now that we’ve got a few years of experience, is that keeping these taxes at a reasonable level also keeps down prices, which is the best way to get rid of the black market,” he said.

While many businesses are pleased with President Donald Trump’s massive corporate tax cut, Lusardi actually welcomes taxes for the cannabis industry.

“The cannabis industry is one of the few industries you’ll find where the players gladly pay their taxes, because it’s an opportunity to embrace the legitimacy of their business,” he said.

By paying taxes, Lusardi explains that cannabis companies are able to contribute to the economy.

“Yeah we are happy to pay taxes. It creates legitimacy for the business. And frankly it puts a lot of money back into our economies. Not only are we happy to pay taxes, but we’re happy to create jobs. Our company alone will create about a thousand cannabis jobs this year and so we’re really proud of that and the contribution we will play in our economy,” he said.

Curaleaf operates in several states, which can complicate its tax burden.

“We’re a state-by-state business so we have different tax regimes, state by state. For example in Florida and NY medical marijuana is not taxed at all. And in some markets it is taxed. For example, in Maine the blended tax rate on medical marijuana is about 6 or 7%. In general, we strive to keep our prices affordable, and the best way to do that is to keep taxes reasonable, so we don’t have to pass the tax burden on to our customers,” he said.

Lusardi hopes taxes on the cannabis industry will stay at a reasonable rate. When states first started legalizing marijuana, the tax rate was higher. Washington set it at 37%, but recent ballot initiatives have set lower rates in other states.

“I think lawmakers are becoming more amenable to keeping taxes at a reasonable rate, going forward, because they realize that overtaxing the legal cannabis industry is going to make it harder to get rid of the black market,” he said.

Sibile Marcellus is an on-air reporter covering the day’s top stories in business for Yahoo Finance’s three daily live shows. Follow her on Twitter @sibileTV.



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