Murphy, Senate leaders reach deal on cannabis cultivation excise tax

11/16/2020

Politico

Timing is of the essence for pro-cannabis forces.

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Gov. Phil Murphy’s administration and Senate leaders have reached an agreement on the structure of an additional excise tax that could be imposed on recreational cannabis cultivators, according to five sources with direct knowledge of the negotiations.

Why it matters: Disagreements between Murphy, Senate President Steve Sweeney and Assembly Speaker Craig Coughlin over an additional excise tax threatened to derail the speedy passage of enabling bill. The recently approved constitutional amendment caps retail taxes at 6.625 percent, the current state sales tax, while local governments can impose an additional 2 percent tax.

Timing is of the essence for pro-cannabis forces. Even though New Jersey voters approved a ballot question on Nov. 3 amending the state’s constitution to allow for the sale and use of recreational cannabis, the drug won't be legal until Murphy signs an enabling bill passed by both houses of the Legislature. Until then, cannabis sales and use will remain illegal.

The enabling bill, NJ S21 (20R) / NJ A21 (20R), which broadly resembles a failed cannabis legalization measure considered by lawmakers last year, is a 200-page-plus behemoth containing intricate criminal justice reforms, licensing provisions and economic recovery measures.

Lawmakers pulled the bill from a Senate Budget and Appropriations Committee meeting last week to resolve outstanding disagreements.

How it works: Nine months after the first recreational retail sale occurs — excluding any recreational product sold by the 12 dispensaries currently licensed to sell medicinal marijuana in New Jersey — the regulatory body overseeing the industry can consider imposing cultivation fees that are tied to the retail sale of cannabis.

That fee can rise as the price of recreational cannabis falls, four of the sources said. If the average retail price of cannabis is above $350 an ounce, the excise fee set by the Cannabis Regulatory Commission can climb to as high as $10 per ounce on cultivators.

If it’s above $250, and below $350, that fee can climb to up to $30 per ounce. The fee can be $40 if the average price is between $199 and $250 and up to $60 if it falls below $199.

The commission will only be able to set cultivation excise fees once per year. A small fee, representing a fraction of a penny on all sales, would take hold on cultivators as soon as the enabling legislation takes effect.

What’s next: While the agreement between the administration and Senate leaders represents a critical breakthrough, there are several issues on the enabling bill that need to be worked out.

Kevin McArdle, spokesperson for Coughlin, said in a text message that the speaker is reviewing the proposal. Coughlin has issued previous statements supporting additional excise fees.

Lawmakers and Murphy administration officials still need to come to an agreement on how recreational cannabis revenues are disbursed, including how dedicated funds should be set aside for projects in communities that bore the brunt of enforcement in the War on Drugs.

“We don't want to be overly constrained but we’re open-minded,” one administration official told POLITICO.

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published this page in News and Politics 2020-11-17 03:39:03 -0800