Cities, towns, and villages can opt-out of allowing adult-use cannabis retail dispensaries or on-site consumption licenses from locating within their jurisdictions, but legalization is a done deal. Adult-use cannabis possession and use by adults 21 years of age or older following the Marijuana Regulation & Taxation Act (MRTA), is legal throughout New York State. Less than a month away from the deadline, the countdown is on to opt-out of collecting marijuana tax! With just a few weeks left to make a final municipal decision, what are the pros and cons, and what is the tax revenue loss like if your municipality opts out?
Opt-out Deadline
To opt-out of allowing adult-use cannabis retail dispensaries or on-site consumption licenses, a municipality must pass a local law by December 31, 2021. The impending deadline was designed to give the marijuana markets some consistency and now that the clock is ticking to decide, many towns, cities, and villages are scrambling to schedule public hearings on the issue in the coming weeks before it’s too late. If a municipality does not take any action by December 31, 2021, the municipality will be automatically included, and unable to opt-out at a future date. However, a municipality may opt back in, to allow either, or both, adult-use retail dispensary or on-site consumption license types by repealing the local law which established the prohibition.
Local Control
Except for the opt-out provision, all municipalities including counties are blocked from adopting any law, rule, ordinance, regulation, or the prohibition on the operation or licensure of adult-use, medical, or cannabinoid hemp licenses. However, towns, cities, and villages can pass local laws and regulations governing the time, place, and manner of adult-use retail dispensaries and on-site consumption licenses as long as the local law and regulations do not make the operation of the license unreasonably impracticable as determined by the Cannabis Control Board. For example, cities, towns, and villages are permitted to pass laws and regulations on local zoning and the location of licensees, hours of operations, and adherence to local building codes. Municipalities may not issue local licenses to cannabis licensees.
Taxes
Municipalities that do decide to opt-out will not be eligible to receive any of the revenue generated from adult-use marijuana sales. MRTA establishes a 13 percent tax on adult-use marijuana sales, 4 percent of which is distributed to local governments based on where the retail dispensary is located. 25 percent of the tax revenue goes to the county and 75 percent goes to the cities, towns, or villages within the county as a proportion of cannabis sales. If a town and a village within the town both allow adult-use sales, the revenue will be distributed based on an agreed-upon distribution agreement between the town and village. If no such agreement exists, then the revenue distribution between the town and village will be divided evenly.
Your Municipality’s Decision
Final appointments to the Cannabis Control Board and the Office of Cannabis Management were not made until September 2021—six months after MRTA became law—and the Cannabis Control Board didn’t hold their first meeting until October 5, 2021. The delays have caused a widespread wait-and-see approach by municipalities with many opting to get on board when there is a clearer picture of what retail marijuana operations will look like after further state regulations are announced. Ultimately gaining public feedback and weighing the pros and cons of tax revenue generation should help you make the best decision for your community. If you have questions regarding this deadline, we can help. Contact our dedicated Government group at RBT to schedule a consultation today. Additionally, if you would like to submit feedback or topic ideas for future articles our team produces, please feel free to contact us at TLideas@rbtcpas.com.
Sources: Cannabis.ny.gov, Ny.gov/local-government