Specifically, the budget proposal establishes a regulatory structure for adult use of marijuana and imposes three taxes.
As an update to our January 11, 2021, Alert, on January 19, New York Governor Andrew Cuomo released his 2022 budget, which includes additional details about the cannabis legalization proposal he announced during his 2021 State of the State address on January 6. Cuomo’s proposed legislation has the same name as last year’s proposal, the Cannabis Regulation and Tax Act (CRTA). Specifically, the budget proposal establishes a regulatory structure for adult use of marijuana and imposes three taxes, as follows:
- A wholesale THC-based tax at various rates according to the potency level or THC content of different product categories, such as:
- Cannabis flower/pre-roll/shake products are taxed at a rate of 0.7 cent per milligram of THC content.
- Cannabis concentrates/oil products are taxed at a rate of 1 cent per milligram of THC content.
- Cannabis infused/edible products are taxed at a rate of 4 cents per milligram of THC content.
- The sale of adult-use cannabis products by a retail dispensary to a consumer is subject to a surcharge at a rate of 10.25 percent of the final retail sale price; and
- The applicable state and local sales tax rates are imposed on the same retail sale by a retail dispensary to a consumer. The prevailing local sales tax rate is based on the county and/or city in which the retail dispensary is located.
This means that consumers in most areas of the state will pay a total of 18.25 percent when purchasing cannabis products, while those in a few counties will pay a total tax rate as low as 17.25 percent. Customers in New York City and Yonkers will pay more than 19 percent tax on cannabis products.
The first $10 million from the THC-based tax, retail surcharges and any license fees in fiscal year 2023, $20 million in fiscal 2024, $30 million in fiscal 2025, $40 million in fiscal 2026 and $50 million annually thereafter will be earmarked for social equity purposes, with the remainder directed to the newly established New York State Cannabis Revenue Fund.
Additionally, included within CRTA, the budget extends the current excise tax provisions for the expanding medical cannabis program, as well as the current revenue distributions for an additional seven years and directs the currently undistributed 45 percent of tax revenue to the New York State Cannabis Revenue Fund.
Cuomo estimates that his proposal would raise about $350 million when fully implemented in about four years, of which $100 million would go to a social equity fund.
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