As part of her budget, the governor of New York has proposed the elimination of the THC potency taxes. She is hoping to lower costs for consumers and make the regulated cannabis market more competitive with illicit operators.
Gov. Kathy Hochul (D)’s budget proposal for 2025 fiscal would repeal the potency taxes and replace them with a wholesale tax of 9 percent. This “simplifies and streamlines tax collection obligations for cultivators and processors and reduces their burden.”
Cannabis would still be subject to existing state and local excise taxes of 9 percent each. Estimates show that the changes will reduce the overall tax rate for marijuana from 38 percent on average to 22 percent.
For vertically-integrated medical cannabis operators and microbusinesses, the new wholesale excise tax would accrue on the final retail sale to consumers and be imposed on 75 percent of the final retail sales price, the governor’s proposal says.
In the briefing book of the budget, it is stated that the tax changes will “promote & support the expansion” of the adult-use legal cannabis market and result in “net positive impacts” of $6.5 millions for localities.
By reducing the costs to consumers and businesses, tax policy reform can also help the administrations and regulators achieve one of their main priorities: driving out illicit markets.
New York is dealing with the proliferation of hundreds unregulated cannabis shops, whose prices are lower than those of licensed businesses because they don’t have to worry about excise tax or other regulations which increase costs.
Sen. Jeremy Cooney (D), chair of the state Senate Cannabis Subcommittee, similarly proposed eliminating the THC potency tax as part of a bill he introduced last year, but it has not yet advanced.
The New York Office of Cannabis Management , meanwhile, has released its latest annual marijuana report , along with two separate documents that focus on equity in industry and enforcement against unlicensed operations.
This report was released just days after OCM provided with a snapshot of the first year of legal cannabis sales in the state. The report highlighted that more than 3.5 millions cannabis products were purchased by consumers during 2023. Total sales are expected to be over $150 million.
OCM reported that the state had seized 11 600 pounds of illegal marijuana products valued at $56 millions. The state also conducted 369 “enforcement checks” on illicit operations.
Hochul’s proposed budget includes $68.1 million for OCM funding in the next fiscal.
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A bill introduced in the Assembly earlier this month would give local governments the authority to close down cannabis businesses that are not licensed and seize the products.
It says that the budget proposal of Governor includes similar legislation that allows state and local officials “to seal or padlock a cannabis business without a license.” The budget also “provides more staff resources to Department of Taxation and Finance in order to support these expanded enforcement efforts.”
New York regulators have begun processing hundreds of marijuana license applications. In December, over a dozen cannabis retailers opened after a settlement agreement lifted an injunction which had imposed months-long licensing blocks.
The governor stated that his top priority was to expand the legal cannabis industry in New York while tackling the illegal storefronts which continue to plague the communities.
The state’s Department of Labor also published sample job descriptions for various positions in the legal cannabis industry last month. Officials said that the samples were intended to streamline the hiring process and to allow potential employees to evaluate their qualifications in order to work in different roles in the emerging cannabis sector.
Hochul signed a separate bill in November to provide tax relief to New York City marijuana businesses that are currently blocked from making federal deductions under an Internal Revenue Service (IRS) code known as 280E. She also signed a bill to give tax relief to New York City cannabis businesses who are currently barred from taking federal deductions due to an Internal Revenue Service code called 280E.
New York City’s tax laws were not affected by the change in Hochul’s budget bill of 2022, which included provisions allowing state-level cannabis businesses tax deductions. This new measure is intended to close that policy gap.
Hochul vetoed a bill that would have allowed Hemp seeds to be added to animal feeds for horses, pets and camelids like llamas or alpacas.
In September, about 66 state legislators–about one-third of the state legislature as a whole–also sent Hochul an email urging her to sign a law that would permit licensed marijuana producers to sell their products to tribal retailers . This plan would provide a way for cannabis farmers to release surpluses they have but are unable to sell. Hochul, however, vetoed the bill last month.
Marijuana Legalization Among Top Legislative Priorities For Hawaii’s Senate Majority
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