This is the latest edition of Cannabis Wire New York, a semi-regular, subscriber-only newsletter that focuses on policy and regulatory developments in the state
Why Does New York Tax Medical Cannabis? Lawmakers Want to Strike It.
Sens. Jeremy Cooney and Jessica Scarcella-Spanton took to the Million Dollar Staircase in the New York State Capitol Building in Albany on Wednesday afternoon to build support for Senate Bill S5365, which would repeal the excise tax on medical cannabis. (This famous staircase, which has been home to many speeches and rallies over the years, features 77 hand-carved faces.)
Cooney highlighted the number of overdoses from opioids in Monroe County, the region of upstate New York that he represents, and research that supports medical cannabis as a way to reduce the need for opioids.
There are currently just over 120,000 registered medical cannabis patients in New York, a state with roughly 20 million residents. For comparison, Cooney said, Florida has a comparable population and nearly 800,000 registered medical cannabis patients. He points to high taxes as one reason for the difference.
“We need to make sure that we are supporting our medical cannabis program,” Cooney said, calling the excise tax “regressive.”
“Why are we taxing medical cannabis? We need to do something about it. This legislation helps us get there today,” Cooney said.
Earlier this week, Cooney teamed up with Assembly Majority Leader Crystal Peoples-Stokes to push a bill that would repeal the THC potency tax on adult use cannabis products and increase the excise tax from 9% to 16%, as Cannabis Wire reported.
The state’s medical cannabis program is nearly a decade old. Americans for Safe Access, a national group focused on medical cannabis advocacy, gave New York a C- in its annual State of the States report because, while access has increased as a result of an expanded qualifying condition list, cost remains a significant barrier.
States with legal medical cannabis take different approaches to taxation. Many don’t tax medical cannabis at all. Some only apply the state sales tax. New York applies a 7% excise tax in addition to the state sales tax, which is one of the highest medical cannabis taxes in the country. And, as cannabis remains federally illegal, insurance doesn’t cover the cost as it would prescribed medicines.
Scarcella-Spanton said that her own family members have experienced the high costs.
And these costs, Scarcella-Spanton said, “only serve to restrict patient access across the state, especially for economically disadvantaged workers.”
Bryan Murray, chair of the New York Medical Cannabis Industry Association, said that these barriers could also push patients out of state or to the unregulated market.
“There’s a demand for medical cannabis. And the question becomes, where is that demand going to be met? Is it going to be met through the regulated industry? Will it be met by other states, like Connecticut, Massachusetts and New Jersey?” Murray asked. “This bill seeks to ensure that those who need medical cannabis can get access to it in the state in which they live: New York.”
Desarae Little, a medical assistant and a longtime medical cannabis patient, described the hundreds of dollars she spent each month on medical cannabis. She turned to medical cannabis to wean herself off of the opiates she was prescribed to help treat pain related to the autoimmune condition sarcoidosis.
“Seven percent is a lot,” she said. “The cost to the patient becomes significant.”
“Equity is Being Tried in Courts”
The Variscite case, which challenges the application process and has blocked the awarding of CAURD licenses in five regions, is ongoing. (The five regions: Finger Lakes, Central New York, Western New York, Mid-Hudson, and Brooklyn.)
In February, the U.S. District Court for the Northern District of New York judge upheld the preliminary injunction that he granted Variscite in November. It was also in November that regulators awarded the first CAURD licenses, but were unable to do so in those specific regions. New York State Assembly Majority Leader (and Marihuana Taxation and Regulation Act co-sponsor) Crystal Peoples-Stokes commented during the public comment period at that Cannabis Control Board meeting, and specifically called out the lawsuit.
Peoples-Stokes said she was “proud” that the initial CAURD licenses had been awarded, but that it was “disappointing” that her region of Buffalo was left out of the announcement.
“I know we’ll get through whatever these people want to do or try to do to us in the court system,” Peoples-Stokes said, adding that it’s “sad” that “equity is being tried in court.”
Timeline: 2023 so far…
With spring nearly upon us, and extra hours of daylight just around the corner, this feels a fitting moment to pause and take stock of what has transpired in New York in the first couple of months of the year.
• January 4: The New York Office of Cannabis Management released its inaugural annual report on the state’s implementation of the adult use cannabis program. (CWire)
What caught our eye:
The report concludes with eight recommendations to “support and strengthen the efforts already underway to achieve the purposes and intent” of the cannabis law. Among them: that regulators “use every tool possible to shut down … illegal operators,” further expand the medical cannabis market, and specifically support environmental and sustainable cannabis practices. (CWire)
One area where regulators will continue work throughout 2023 is around the precise definition of “what constitutes a community disproportionately impacted,” or CDI, by enforcement. People from these areas will be “prioritized” for equity licenses.
Members of OCM are working with the Division of Criminal Justice Services (DCJS) to compile millions of cannabis-related arrest records and are currently “cleaning and analyzing the arrest dataset.”
• January 18: City Councilmembers Gale Brewer, Marjorie Velázquez, and Lynn Shulman hosted a joint hearing about how unlicensed cannabis sales unfairly compete with the roll out of legal adult use sales. (CWire)
It was more than foot traffic and the promise of sales that sparked the onslaught of unregulated shops. The “proliferation” of unregulated smoke shops “coincided with the COVID-19 pandemic, and that smoke shop operators were some of the only businesses opening brick-and-mortar locations amid pandemic-spurred vacancies and declining rents,” according to a committee report published ahead of this Council hearing.
• January 24: SMACKED, LLC, opened in downtown Manhattan’s Greenwich Village. It opened as a pop-up, which, while framed by Gov. Kathy Hochul and New York regulators as an opportunity, laid bare the long road ahead in the Dormitory Authority’s effort to secure leases for equity license holders. More on that came the next day…
• January 25: Regulators approved another 30 conditional retail licenses. (CWire)
Cannabis Control Board member Reuben McDaniel, who is also the president and CEO of the Dormitory Authority, gave a brief update on the effort to secure leases for CAURD licensees (CWire), as DASNY oversees the public-private fund that is aiming to raise $200 million to provide them with turnkey shops. (CWire)
Little has been made public about progress toward raising those funds.
“I’ve been very hesitant to negotiate and talk about this in public because it’s very difficult with sensitive retail location negotiations going on, as well as fund raising negotiations going on. We’ve talked to a lot of significant investors,” McDaniel said. “We’re doing a lot of this – I don’t want to say behind the scenes because it’s not behind the scenes– but a lot of it has to be carefully and delicately negotiated for various reasons. So I wish I could tell you more.”
• February 7: Manhattan District Attorney Alvin Bragg held a press conference to highlight 400 warning letters that his office sent to landlords choosing to rent to unlicensed cannabis operators (CWire).
If those owners and landlords continue business as usual, Bragg said that the DA’s office will step in and increase penalties.
“My office is prepared to take over and pursue eviction proceedings,” Bragg said.
• February 10: Upstate New York got its first adult use shop. Just Breathe opened in Binghamton, complete with a visit from Gov. Kathy Hochul. This remains the only legal adult use shop open outside of Manhattan.
• February 13: Union Square Travel Agency: A Cannabis Store, owned by the nonprofit The Doe Fund, opened in downtown Manhattan. In late 2022, a presentation to Community Board 2 by The Doe Fund and its cannabis partners led to debate over the role of outside brands and investors. (CWire)
• March 2: New York regulators doubled the number of available CAURD licensees, from 150 to 300. (CWire)
“As we have continued to review applications, we found there’s still many qualified individuals who can make the most of this opportunity outside of that initial 150,” Chris Alexander, OCM executive director, said during the early March meeting. He added that the expansion is “in recognition of the strong pool of applicants, the ability of some of these individuals to bring their own locations” and of the Office’s “desire to expand the market as quickly as possible.”
While Alexander hinted at well-resourced CAURD applicants, he emphasized that there’s a ceiling on the financial lift that the state can do for justice-involved applicants.
“It’s important to understand that the resources of the fund are not limitless, and under the expansion, the first 150 licensees will continue to have access to the fund if they want it. Those who decline will free up resources that will be made available — but not guaranteed — to those in the expanded group of 150 applicants,” Alexander said.
At some point in the coming months, regulators are expected to release final regulations for the adult use industry. In other words, the regulations that will apply to non-conditional growers, processors, and retailers, and to the other awaited license types, like microbusinesses.
And, crucially, lawmakers are debating legislation that is expected to strengthen enforcement against unlicensed operators. It has yet to be introduced, but it may well end up as part of the budget package.