Minnesota has one of the most attractive marijuana markets in the U.S., with low taxes, reasonable licensing fees, and no neighboring states that have legalized cannabis.
By Ari Hoffnung, Bridge West Consulting
Minnesota, the 23rd State to legalize adult use cannabis has learned from other states’ policy mistakes.
Reviewing the 300-page state bill, it is clear that “The Land of 10,000 Lakes”, as the state calls itself, is on its way to becoming one of the best markets to start a cannabis company in the United States.
Minnesota’s annual cannabis sales will surpass $500 million in fiscal year 2027. Economic benefits are not limited to cannabis-related businesses such as cultivators, manufacturers and dispensaries. The economic benefits will extend to other professional service providers, such as law, accounting and engineering firms, whose services are needed to support the start-up and operation of thousands of cannabis businesses.
Minnesota is poised to become the largest cannabis market in the United States.
1. Minnesota’s cannabis excise tax is low.
Minnesota has set an enlightened rate for cannabis excise tax. Minnesota has the 5th lowest cannabis taxes in the nation, at 16.875 percent. Only four states offer rates that are marginally lower, namely Michigan, Delaware, New Jersey and Maryland.
High taxes can increase the cost of legal cannabis and drive consumers to look for cheaper alternatives on the illegal market. This trend is a sad one that has been seen in states like California with high taxes.
Minnesota’s low tax rates ensure that the legal cannabis market is competitive with the illicit market.
2. Minnesota prohibits localities to ban cannabis businesses.
Minnesota has successfully navigated around the issue of local control by preventing local governments from denying completely the establishment or operation licensed cannabis businesses in their area.
The policy that allows local jurisdictions the option to opt out may be politically appealing but it has proven to be problematic in many states. In New York, for example, nearly half of the municipalities opted out. This has limited consumer access to cannabis that is legal and encouraged the illicit, unregulated market.
Minnesota’s bill allows local governments to participate in the licensing and imposing of reasonable restrictions without opting out.
It will also allow localities the option to limit the number of dispensaries in accordance with population. At least one dispensary per 12,500 residents is required. The City of Mankato, with its population of 45,000, could limit the number to three dispensaries but not ban them.
3. Minnesota’s licensing fee is reasonable.
Minnesota’s cannabis legislation includes reasonable fees that are based on the size and nature of the business.
Some states have unwisely charged licensing fees of up to millions of dollars on new cannabis businesses without considering the negative impact this could have on their market.
Minnesota’s fee structure is based on the size and type of business. This encourages a competitive and diverse market without imposing prohibitive costs which could discourage new businesses.
4. Minnesota offers loans to marijuana entrepreneurs
Minnesota has allocated funds for programs that assist social entrepreneurs. This avoids the dangers of mandates without funding.
The state, for example, has allocated $6 million to the CanStartup program, which grants money to nonprofit organizations. These nonprofits provide loans to budding marijuana businesses, and create jobs in all communities in the state.
Minnesota has made significant progress in the right directions. Additional funding will be required, but it is already a good start.
5. Minnesota’s neighbors do not have legalized marijuana.
Minnesota’s population was estimated at 5.7 million according to the 2020 Census. Minnesota shares a border with four states: Wisconsin, Iowa, South Dakota, and North Dakota. None of these have legalized Adult Use Cannabis. A 50-mile radius around Minnesota is home to an estimated 1.9million people.
This means that Minnesotans will not only not have to compete against out-of state cannabis dispensaries, but they will also benefit from purchases made by out-ofstate residents who live in a close proximity, such as those from Fargo, North Dakota (124,000 people) and Sioux Falls (population 187,000).
Colorado’s cannabis market is a good place to look for additional proof that Minnesota offers great opportunities for cannabis entrepreneurs.
Minnesota’s cannabis market is a lot more mature than Colorado and will have $1.8 billion worth of retail sales by 2022. It may seem absurd at first, but it’s not.
The population of both states is nearly the same. The U.S. Census Bureau estimates that Minnesota’s population in 2020 will be 5,706,494, which is just a little less than Colorado, at 5,773,714. Statista data shows that 23% of U.S. adult users in Minnesota used cannabis during the last year (2019-2010) compared to 28% of adults in Colorado. This difference is likely due to the high number of dispensaries in Colorado.
There’s also no reason to believe that the cannabis markets in Colorado and Minnesota will not perform similarly over time. Minnesota could be a leader in some areas, as it has tax rates that are lower than Colorado, and policies which will allow regulators the ability to limit licenses across the state in order to maintain a balance between supply and demand.
The Land of 10,000 Lakes may surpass the Centennial State by 2033 in terms of annual cannabis sales.
Ari Hoffnung is the Partner of Bridge West Consulting. Bridge West LLC is one of the world’s first accounting firms to specialize in the cannabis industry. Since 2009, more than 600 clients have been added to the practice, including hemp, CBD, and cannabis. Ari was previously the Chief Operating officer of Vireo Health. Vireo Health of Minnesota is one of the two licensed medical marijuana companies in Minnesota.
The article Five reasons Minnesota is a great place to build a cannabis business (Op-Ed:) appeared first on Marijuana Moment.
