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Cannabis Tax Talk, New York Style

Cannabis Tax Talk, New York Style

Cannabis Crimes of the Past Forgiven?

Legalization Decisions: Should Previously Convicted Cannabis “Criminals” Be Released?

If Gov. Andrew M. Cuomo has his way, New York will become the 11th stated to decriminalize marijuana.  Since early 2018, there have been rumors, public listening sessions, and government reports.   All of them have been leading up to the possible legalization of recreational cannabis.  If this interests you, please go back and read or review our previous blog. 

Cannabis News and Views in New York

Last week, Feb. 27th, the City Council Committee on Justice and Committee on Civil and Human Rights held a hearing on marijuana legalization on Wednesday.  During that hearing, Manhattan District Attorney Cyrus Vance testified “about his office’s decriminalization efforts and pushed for Albany lawmakers to follow suit.”

Likewise, Councilman and Public Advocate-elect Jumaane Williams testified.  He drafted five of the bills that came up for discussion at the hearing.  In case you didn’t know, the vast majority of voters in New York support legalizing marijuana.  And, they want to erase past criminal convictions for possession, according to a Quinnipiac poll released Jan. 24.

Cannabis Opinion Spans Socio-Economic Barriers

Experts stated that the “support crosses racial, gender, political and regional demographics, with every surveyed group in favor of the legalization push…”  At Gavrilov & Co, we always want to see the numbers.  Here’s how they work out:

  • 65 percent in support of legalizing cannabis statewide,
  • 31 percent against legalizing cannabis,
  • and the remainder unsure.

Facts are according to poll analyst Mary Snow of Quinnipiac University, which conducted the survey earlier this month.  She stated, “We’re seeing New Yorkers in support of legalization.”  then, she added, “There are some concerns being expressed, for example, about the potential increase in car accidents,” due to cannabis smoking while driving.  But overall New Yorkers say they would be in favor of legalizing marijuana…”

State draws closer to legalizing Cannabis

Cannabis" To Be or Not to Be?

Decisions Yet to be Decided: Tax Rate? Compliance? Enforcement?

So at Gavrilov & Co, we are intensely interested in the effects all of this will have on the budget, and of course on taxation.  We all know the state budget plan needs to be ready by April 1.   Assembly Speaker Carl Heastie tweeted on Jan. 31.  “Being honest and saying six weeks may not be enough time to come up with regulations, deal with the economic impact on communities and the criminal justice aspects…” to get legislation prepared.”

Likewise, Assembly Majority Leader Crystal Peoples-Stokes stated Feb. 1 that legislators are “only about 50 percent of where we need to be with the governor’s proposal.  A lot of conversations need to be had.”

Taxes Are The Gavrilov & Co Concern: Take a Look

Let’s take a look at the tax advantages to the new proposed state laws.
• In his budget address earlier this year, Cuomo projected that revenue from legalizing the drug could be as much as $300 million.
• But experts advise that this cannot happen until the plan is rolling, about 2023.
• Experts also advise that the state wouldn’t see any tax revenue until 2021.  At that time when the expected state revenue is $83 million.  It’s a matter of time before all of this happens, contingent on legislation.

Taxing Marijuana: A Delicate Art

The first step that daunts legislators is figuring out not only who to tax, but how much to tax.
We have examples in other states.  And yet when we analyze it, the struggle in creating an acceptable tax rate is obvious.

Here is the problem:
1. On the one hand, if the legislature sets the tax too low, New York loses badly needed revenue.
2. And, on the other hand, if they set it too high, they risk driving marijuana users to the black market, where the product could be cheaper.

Thus we see 10 percent plus sales tax in Michigan up to 37 percent in Washington State.  Can you guess what the highest rate in the US is? (37% wins that dubious honor.)

On top of that, some states “also charge their normal sales tax;  others don’t, on cannabis. ”
Massachusetts, our neighbor, charges 17 percent in excise and sales taxes, “plus local governments have the option to tack on a tax of up to 3 percent.”

The Governor’s Cannabis Tax Plan:

Cannabis: No Sales Tax

No Sales Tax? Wow! That is Bound to Make Some People Happy.

Cuomo’s proposal, which he unveiled in January, calls for three separate taxes.
• The first tax would be on marijuana growers: $1 per dry-weight gram of cannabis flower and $0.25 per dry-weight gram of cannabis trim.
• Add a 20 percent state tax on marijuana when its sold from a wholesaler to a retailer.
• Moreover, if the wholesaler is also the retailer, then the retail customer pays it directly.  Also of note: He pays at the time of sale.
• And, the third tax?  2 percent goes to the county where the retail dispensary is located.

All told, it would be a 22 percent tax on top of the per-gram taxes on marijuana growers.  And the sales tax would not apply.  There is an alternative from lawmakers which makes the tally up to only 15 percent, but the communities get to levy 3 percent of it.

Much Ado about New York Cannabis Revenue

And, how will the state spend all that money?  Needless to say, lots of people are giving advice about what to do with the revenue.  And their ideas are varied and complex.  Perhaps they are worthy of another blog.

But for now, thank you for reading the Gavrilov & Co Blog and please return regularly. (By the way, we hope you are pulling your tax information together and will be coming in to see us soon.)