New York projects $1.25 billion in pot tax revenue over six years

New York is poised to receive $1.25 billion in revenue from taxes on legal cannabis sales, according to a budget forecast by Democratic Gov. Kathy Hochul released Tuesday. The revenue projections are included in next year’s state budget, which includes significant investments in projects to continue the economic and social recovery from the ongoing coronavirus pandemic.

“We have the means to respond immediately to the COVID-19 pandemic and to capitalize on this unique opportunity for the future with a historic level of funding that is both socially responsible and fiscally prudent,” Hochul said in a statement from the regional council.

New York’s fiscal 2023 state budget, detailed in an 85-page governor’s office report book, projects $56 million in cannabis revenue, including $40 million from cannabis company royalties. State legislatures legalized recreational cannabis last year, and since taking office in August, Hochul has vowed to speed up regulation of adult-use cannabis, which was launched by Andrew Cuomo, the former governor who resigned last summer over a sexual harassment scandal. had stalled.

The Office of the Governor predicts that the state will collect more than $1.25 billion in revenue from taxes and fees on recreational cannabis over the next six years, with the annual total increasing as more producers, processors and retailers take their start business. Cannabis tax revenue is expected to increase to $95 million in fiscal 2024 and an estimated $363 million in 2028.

New York budget projections include cannabis “potency tax” revenue

Taxes for the New York cannabis industry include an excise tax of 9 percent and another 4 percent tax for local governments. State regulations also provide for a separate tax on THC, with the amount of tax levied increasing as a product’s potency increases.

David C. Holland, a New York attorney with extensive experience in cannabis policy and law, says that “at first glance, the THC potency tax appears like a state tax smash, but in fact it is viewed by some as an ingenious, recession-proof tax to do with it.” the state receives predictable revenues.”

Holland explained that the tax on THC is levied at a rate ranging from $0.005 (half a penny) per milligram of THC to $0.01 (one cent) per milligram, depending on the form of the cannabis product (i.e. dried flower). , extracts). or edibles). For example, a edible with 10 mg of THC would be taxed at 10 cents, while a edible with 100 mg would be taxed at a dollar. The THC tax is levied on wholesale transactions when products are transferred from distributors to retailers.

Holland, who is also co-founder and president of the NYC Cannabis Industry Association, noted that the THC tax gives the state government a revenue stream that isn’t dependent on the ups and downs of the economy.

“What makes it recession-proof is that the price per pound of cannabis, whether $1,000 in times of shortage or $200 in times of surplus, is irrelevant — the potency tax remains constant due to the THC concentration of the raw or processed product, and this Tax is consistent across product lines,” Holland wrote in an email to High Times.

“As such, the tax is truly a more predictable source of revenue for the state and insulates it from the boom-and-bust cycles of plant cultivation and the idiosyncrasies of market consumers in the form of cannabis they choose.”

Proceeds from the 9 percent state consumption tax are split among several social programs, with 40 percent going to education, 40 percent to community reinvestment, and the remaining 20 percent to substance abuse treatment. Revenue from the additional four percent tax will be shared by local governments, with counties receiving 25 percent and 75 percent going to cities, towns and villages.

The start date for legal adult cannabis sales in New York has yet to be determined, but is expected to come later this year or early 2023.