Highlights of the Marijuana Regulation and Taxation Act
On Wednesday, March 31, 2021, Governor Andrew Cuomo signed the Marijuana Regulation and Taxation Act. This act immediately allows individuals to possess up to three ounces of cannabis for recreational purposes or 24 grams of concentrated forms of the drug. The bill also creates the Office of Cannabis Management (OCM), which will oversee and release regulations for licensure. Most experts do not expect legal adult-use sales to begin until late 2022.
Applicants will be able to seek licenses for both cultivation and processing, or for distribution, or for retail, but are not permitted to be vertically integrated and sell products directly to consumers. Businesses holding a retail dispensary license, or an on-site consumption license will be allowed to sell directly to consumers. One exception to this is applicants seeking a microbusiness license. This will allow a seed-to-sale structure, but the OCM will establish annual caps on activity and only allow such businesses to distribute its own products to consumers and dispensaries.
The program has a goal to give 50% of licenses to equity applicants. This includes minority- and women-owned businesses, distressed farmers, service-disabled veterans, and people whose relatives have been convicted of marijuana offenses. Equity applicants will also have the chance to qualify for zero-interest loans, grants, and incubator programs. However, many of the details for these programs are yet to be established by the OCM.
Tax on adult-use cannabis products will be a two-tier structure. Products sold to retail locations by distributors will be subject to tax based on a per-milligram of THC measurement, which varies based on the type of product. At retail, a 13% tax will be imposed. The retail tax consists of a 9% sales tax plus an additional 4% tax to be split by county and local governments. Cities, towns, and villages have until December 31st, 2021 to opt out and not allow for retail sales within the jurisdiction.
Being directly involved with current NYS medical license holders, Bowers & Company holds the knowledge and expertise to help your cannabis business succeed.
Here are some of the services we plan to offer to the industry:
- Attest and consulting engagements during the licensing process
- Tax planning and entity structure in relation to IRC Section 280E
- Valuations and projections of businesses
- Client accounting and bookkeeping services
- Financial statement audits and reviews
- Consulting on operating procedures, internal controls and best practices
- Tax return and cannabis sales tax compliance
Bowers & Company CPAs is eager to service this exciting and growing industry every step of the way. As more details become available, we will be sure to keep you updated.
For more information, please contact Nick Agrippino, CPA, CCIFP, MBA at (315) 234 8129 or firstname.lastname@example.org.
Disclaimer: To ensure compliance with requirements imposed by the Department of Treasury, we inform you any U.S. federal tax advice contained in this document or video is not intended for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.