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Potency Tax Reform: A Game Changer for New York’s Cannabis Market

Hey there, fellow cannabis enthusiasts! Today, we’re diving deep into Governor Kathy Hochul’s groundbreaking move to repeal the THC potency tax and replace it with a wholesale excise tax. Buckle up for a journey through New York’s evolving cannabis landscape.

Understanding the Tax Tango

Let’s start by breaking down the tax situation in the Empire State. New York has been grappling with a high potency tax on THC, which has driven up prices for and made the regulated market less competitive against the illicit one. But Governor Hochul is swooping in with a solution that aims to simplify, streamline, and reduce the tax burden for everyone involved.

**Potency Tax on the Horizon**

What’s the big change? Well, Governor Hochul’s proposal for the 2025 fiscal year seeks to eliminate the potency tax and replace it with a 9 percent wholesale excise tax. It’s like waving a magic wand that says, “Let’s make things simpler and more affordable for all of us.” Cannabis will still be subject to the existing state and local retail excise taxes, but this new move is estimated to bring down the total tax rate on marijuana from a whopping 38 percent to a much more reasonable 22 percent.

For the Little Guys

Now, let’s talk about the little guys in the industry, the vertically-integrated medical cannabis operators and microbusinesses. The new wholesale excise tax will come into play on the final retail sale to consumers, and it’ll be imposed on 75 percent of the final retail sales price. Sounds like a good deal, right?

The Big Picture

So, what’s the deal with all these tax changes? Why should you care? Well, here’s the deal – reducing costs for consumers and businesses isn’t just about saving a few bucks. It’s about taking a stand against the illicit cannabis market.

**Driving Out the **

You see, while the legal cannabis business has been inching forward at a snail’s pace, New York has seen an explosion of unregulated cannabis shops. These guys offer lower prices because they don’t bother with excise taxes or those pesky . But with these tax , the could finally have a fighting chance.

A Senator’s Vision

Senator Jeremy Cooney, chair of the state Cannabis Subcommittee, had a similar vision when he proposed eliminating the THC potency tax last year. However, his bill hasn’t made much progress yet. But now, with the governor’s proposal on the table, there’s hope for change.

New York’s Cannabis Odyssey

The New York Office of Cannabis Management (OCM) has been keeping tabs on the state’s cannabis industry. They recently released their annual marijuana industry report, and the numbers are impressive. In 2023, consumers purchased over 3.5 million cannabis products, with total sales expected to surpass a cool $150 million.

Cracking Down on Illicit Activity

Enforcement against unlicensed cannabis activity is also on the rise. The state seized a whopping 11,600 pounds of illicit products valued at around $56 million. They conducted 369 enforcement inspections of illicit operations. Governor Hochul’s budget is putting forward $68.1 million in funding for OCM in the next fiscal year. That’s a bold move, my friends.

A Bill for Municipal Empowerment

As New York continues its journey to expand the regulated marijuana market, there’s a bill in the Assembly that’s turning heads. This bill empowers individual municipal governments to shut down unlicensed cannabis businesses and seize their products. It’s all about putting the power in the hands of local officials to “seal or padlock an unlicensed cannabis business.”

Regulators in Action

New York regulators are on a roll, processing hundreds of marijuana business license applications. In December alone, more than a dozen new cannabis retailers opened their doors after a months-long licensing blockade was lifted. The governor is committed to growing and expanding New York’s legal cannabis industry while cracking down on those pesky illicit storefronts.

Helping Businesses Navigate the Highs and Lows

The state’s Department of Labor is also doing its part by publishing sample job descriptions for positions in the legal cannabis industry. It’s all about helping companies streamline their hiring processes and giving prospective employees a clear path into the industry.

A Tax Relief Twist

Governor Hochul signed legislation in November that aims to provide tax to New York City marijuana businesses. These businesses were blocked from making deductions under an IRS code known as 280E. But this new measure is here to fill that policy gap and give them some much-needed relief.

Hemp Seeds and Animal Feed

In a surprising twist, Governor Hochul recently vetoed legislation that would have allowed seeds to be included in animal feed for pets and other animals. It’s a reminder that the cannabis industry still faces some hurdles, even as it makes strides forward.

A Ray of Hope for Cannabis Farmers

Back in September, 66 state lawmakers urged Governor Hochul to sign a bill that would allow licensed marijuana producers to sell products to tribal retailers. This move would provide a lifeline to cannabis farmers with surpluses but nowhere to sell their products. Unfortunately, the bill was vetoed, but it shows that there’s hope on the horizon.

In Conclusion

So, there you have it, folks – Governor Kathy Hochul’s bold move to repeal the potency tax and usher in a new era of cannabis taxation in New York. These tax reforms are aimed at making cannabis more affordable for consumers, supporting legal businesses, and driving out the illicit market. It’s a journey that’s just beginning, but the future of New York’s cannabis industry is looking brighter than ever.

*Thanks to Kyle Jaeger for reporting on this issue.*

Rosemary Puffman
I'm Rosemary, a staunch supporter of cannabis legalization and its potential benefits. My roles as a writer, cannabis entrepreneur, and informed investor allow me to contribute to the evolving narrative around cannabis. Through my writing, I aim to destigmatize and educate, while my business ventures and strategic investments align with my belief in the positive impact of responsible cannabis use.

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