First Look: New York State’s Adult-Use Cannabis Legislation

Fox Rothschild LLP

Fox Rothschild LLP

New York will soon join its neighbor New Jersey among the most recent states to legalize adult-use cannabis.

On Tuesday, March 30, 2021, the New York State Senate and Assembly voted overwhelmingly to legalize the recreational use and possession of marijuana for adults over 21. Gov. Andrew Cuomo has signaled that he will sign Senate Bill S854A, or the Marijuana Regulation and Taxation Act, into law in the coming days.

Adult-Use Cannabis Tax Revenue

Under the legislation, cannabis sold at dispensaries will be subject to a 13% total sales tax, consisting of a state tax of 9% and local tax of 4%. The taxes will be deposited into the “New York state cannabis revenue fund” to cover the costs of implementing the law, with the remaining funds split between education (40%), the Community Grants Reinvestment Fund (40%), and the Drug Treatment and Public Education Fund (20%). An additional tax will be imposed on distributors based on the level of THC in the product, ranging from 0.5 cents per milligram for cannabis flower to 3.0 cents per milligram for edibles.

Licensing Structure & Anticipated Timeline for Recreational Sales

The bill creates a two-tiered licensing structure, separating growers and processors from retail dispensaries. Applicants for retail licenses may not have direct or indirect ownership in more than three retail locations. Notably, the legislation aims to grant at least 50% of adult-use cannabis licenses to minorities and those who have been disproportionately affected by cannabis enforcement and prohibition in the past. Women-owned businesses, disadvantaged farmers and service-disabled veterans will also be among those who are prioritized during the licensure process in an effort to promote social equity.

The legislation contains a “municipal opt-out,” permitting cities, towns and villages to prohibit adult-use cannabis dispensaries or on-site consumption licenses within their borders as long as they pass a local law nine months after the effective date of the bill.

Recreational sales are not expected to begin for at least 12-18 months, or until the Office of Cannabis Management (OCM) is prepared to oversee and regulate the recreational cannabis market. The OCM will act as an independent agency and will operate alongside the New York State Liquor Authority. It will be comprised of a five-member board, with three members appointed by the governor and one member appointed by each house of the State Legislature.

Home Cultivation & Medical Cannabis

The bill will also allow individuals to possess up to three ounces of cannabis and 24 ounces of cannabis concentrate outside of the home, while home growers will be permitted to cultivate up to six plants per household. The legislation also widens the scope of medical cannabis use, expanding the list of medical conditions that are permitted to access medical marijuana and allowing home cultivation of medical cannabis for patients.

Criminal Justice Reform

New York’s cannabis bill also allows for automatic expungement or resentencing for those previously convicted of marijuana-related offenses that would now be legal.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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