Gray skies are gonna clear up,
Put on a happy face;
Brush off the clouds and cheer up,
Put on a happy face.
Cannabis is knocking on the door of the Empire State and advocates around the state are singing a happy tune. New York is set to be the 17th state to legalize adult use cannabis and is taking on some issues that many have looked to in their own states but have failed to address.
50 percent of cannabis business licenses are to be issued to social equity applicants: “communities disproportionately impacted by the enforcement of cannabis prohibition” as well as minority- and women-owned businesses, disabled veterans, and financially distressed farmers.
For years states have been trying to figure out how to level the playing field for those who were disproportionately affected by the War on Drugs and many of those states have done so ineffectively. Massachusetts put social equity plans into their legislation but it was later determined that all but two of their 184 cannabis licenses had been issued to white business owners. For years, minority and women owned operators have been shut out of markets because of their lack of access to capital to meet the rigorous requirements for application or the funding to withstand the long regulatory process to get the business up and running. It will be interesting to see if New York can come up with a plan that will equitably share the cannabis pie.
Social consumption sites and delivery services will be permitted.
Cannabis lounges have popped up in various cities, like Los Angeles, San Francisco and Oakland, as well as a few in Denver, but they have not gained wide prominence across the country because lawmakers are concerned that consuming in public will lead to impaired driving and disorderly conduct. However, there is no meaningful statistical data to support those assumptions. Advocates see consumption sites as a place for cannabis to gain acceptance in society and take it out of the shadows. It also opens the door for more revenues from cannabis tourism. Tourists are not allowed to consume in their hotel rooms, so they need to go somewhere and don’t want to end up with a ticket or an altercation with the police because they wanted to experiment. And with the state receiving over 265 million visitors a year, that is a crowd you want coming into your dispensaries and other local businesses.
Cannabis products are subject to a state tax of nine percent, plus an additional four percent local tax that would be split between counties and cities/towns/villages. Distributors will also face a THC tax based on type of product, as follows: 0.5 cents per milligram for flower, 0.8 cents per milligram for concentrated cannabis and 3 cents per milligram for edibles.
Many are raising their eyebrows at the tax that will be imposed based on the THC level in products, no other state has taken this approach, but consumers should rejoice about the 13% tax rate. On average most states hover around 30 to 40% for their tax rates when everything is taking into consideration, so New York is going to be one of the lowest. It is already expensive to purchase product in New York, so hopefully this lower tax rate will help to get customers in the dispensary doors. And since New York has one of the largest black markets in the country, it will be interesting to see if this lower tax rate will help incentivize people to leave the illicit market.
These are just a few of the pieces of the legislation that stand out to me and I can’t wait to see if New York can deliver on their promises to consumers and cannabis businesses. For a long time, Governor Cuomo has been promising to pass legalization and one must wonder, given his current predicament, is he just legalizing to try and change the narrative away from his own problems? Or at this point, do we really care why he has decided to finally push it through?
We probably shouldn’t ask too many questions and just put on a happy face.