By Hugh Jacobsen
Tremaine Wright, the Chairwoman of the Cannabis Control Board of the New York Office of Cannabis Management (OCM), on October 28, 2021 gave a presentation to the Cannabis Committee of the New York State Society of Certified Public Accountants on various items relating to cannabis regulation in New York.
At this presentation, Ms. Wright went over various features of the Marijuana Regulation and Tax Act. She noted that there will be preference to individuals and communities injured by the War on Drugs and reiterated the goal of the legislation to ensure that at least 50% of the licenses go to social equity applicants. She noted that there are nine different types of licenses provided in the statute and that vertical integration will generally be prohibited. However, New York will take steps so that micro businesses will not have to raise as much capital that would be required by other entities. In addition, there is no consideration currently being given to a residency requirement for obtaining a license. In response to a question on capital requirement, she did note that she had heard that people were spending over a $1 million to open up a retail dispensary, and she thought it could be done for less. She also encouraged the industry to provide more education so that people do not enter into significant financial commitments (such as rent) earlier than necessary.
She stated that it is anticipated that retail sales will not begin until 18 months after October 5, 2020. Therefore, the first retail sales would not occur until around April 1, 2023. The special taxation of cannabis products will be based on the percentage of THC in the product. No classes of cannabis products (such as low-dosed beverages) are currently under consideration as ineligible for sale.
Chairwoman Wright touched on schemes where a person received a gift of a cannabis as part of the purchase of an item (such as a t-shirt) for a vastly exaggerated price. Chairwoman Wright stated that these transactions were simply unlicensed sales and enforcement actions will be taken.
Finally, there was a discussion about the effect of Internal Revenue Code Section 280E, which in general denies to a taxpayer any deduction or credit for business expenses (other than cost of goods) as a result of cannabis being classified as a schedule 1 drug-such as cannabis. She said that although this matter is not within the scope of the OCM, it is possible that New York will decouple for income tax purposes such that the New York income tax law will permit a deduction or credit.