Cannabis experts concerned about New York’s potential THC potency excise tax


By Andrew Ward

Last week, New York lawmakers announced a three-way agreement between Governor Andrew Cuomo and lawmakers (Senate and Assembly) to accelerate adult use of cannabis in the state.

According to reports, the bill is said to include a 13% sales tax with an excise duty of up to 3 cents per milligram of THC content. Most of the tax revenue is expected to be used for government spending and communities affected by the war on drugs. Cantor Fitzgerald analysts predicted that tax revenues would not help improve the state budget.

Relatively unknown excise tax area: Excise taxes are common on cannabis and fall into three categories: price, weight, and potency.

The January 2021 National Conference of State Legislatures report found that Illinois is the only state to tax taxes on THC content, akin to the approach on alcohol.

The report pushed back the rationale, citing research showing that THC and alcohol levels do not necessarily determine effectiveness.

Proponents and operators of the New York cannabis community have expressed concerns that a THC tax could discourage operators and buyers from the legal market. There is also a belief that a potency tax further demonstrates the separation between the legislature and the cannabis plant.

Concerns from New York: New York operators and proponents tell Benzinga that they are against a THC tax for a variety of reasons. Ryan Lepore, assistant director of NYC NORML and a member of the board of directors of Empire State NORML, does not endorse the idea.

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Lepore believes the excise duty can create regulatory friction and sees the entire supply chain affected. Consumers pay higher prices for access to accounting-based taxes.

He believes regulators routinely miss the mark for cannabis knowledge.

“The extensive components of chemovars, plant substances and cannabinoids determine the effectiveness of the cannabis plant in contrast to other regulated substances,” said Lepore and pushed back the THC focus.

Photo by Cavan Images / Getty Images

Lauren A. Rudick, partner law firm Hiller, PC, described the proposed excise tax as an “unnecessary exercise of political power that will hinder participation in the regulated market”.

If the tax persists, Rudick hopes the decision will lead to further education on the entourage effect, or the effect created by consuming the entire plant profile.

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The ideal tax model remains uncertain: Morgan Fox, director of media relations for the National Cannabis Industry Association, said most consumers care not about the tax structure but about the bottom line.

Fox noted that he was not a tax expert and the debates about the right cannabis tax model continue. However, higher taxes inevitably lead to higher consumer costs.

The scenario is largely inevitable.

“It is quite difficult to get quality products to market and reduce costs at the same time because there is no real reduction in tax costs,” said Fox.

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Fox noted that various tax structure rollouts in the cannabis space would continue. He recommends that states and operators work together to quickly clarify any regulations that prove burdensome or burdensome.

“It’s something you should look at regularly and listen to the stakeholders involved, especially manufacturers and retailers,” Fox stressed that regulators need to hear from the operators who deal with consumers.

This article originally appeared on Benzinga and was republished with permission.


Beth Edmonds