I don’t think the state will be satisfied with just sales tax.
i think you're right, but it's not a unique situation. Look at what has been done with tobacco.
Like any other revenue stream, tax it too much, and you dry it up, and promote illegal activity...black market cigarettes, etc.
Exactly. Case in point:
After Canada raised its tax on cigarettes sharply, it became so highly profitable to smuggle cigarettes into the country that tax revenues dropped. The high tax promoted smuggling and the government lost all the taxes on the smuggled cigarettes.
As soon as Canada lowered its tax on cigarettes, bootlegging dropped and tax revenues increased.
http://www2.potsdam.edu/hansondj/Controversies/20080227114336.html