Cannabis: legal but still not for sale
Retail sales, and tax dollars, expected by end of the year
A full year into Connecticut’s legalization of adult use cannabis, the state has yet to reap a single tax dollar from sales of recreational marijuana.
But while the rollout has been slightly bumpy, with the General Assembly passing a law this year to halt informal, untaxed sales of cannabis that had emerged from the underground, the state is on-track to begin retail sales by the end of the calendar year with dozens of new businesses owned by people from neighborhoods that for generations had been targets in the failed war on drugs.
By the end of the 2020s, direct and indirect revenue generated from cannabis sales and associated revenues could push over a billion dollars while creating hundreds of jobs in the industry and hundreds of millions in new tax revenue annually, once the rollout evolves into a mature market.
Until then, though, Connecticut residents will slip over the border into southern Massachusetts for their cannabis supplies, bringing their revenue to the northern neighbor and nearby towns including Springfield, Boston, Easthampton, Northampton, Great Barrington and Pittsfield.
“Over the next six months, the department will continue to review and approve medical marijuana preservation plans and provisional license applications, as well as conduct additional lottery rounds,” said Michelle Seagull, commissioner of the state Department of Consumer Protection. “At the same time, the Social Equity Council will be reviewing applications submitted by social equity applicants and work force development plans submitted by medical marijuana producers and dispensaries applying to
convert to the recreational program. We expect adult use sales to commence around the end of 2022.”
The state recently received 41 applications for cultivator licenses under the social equity provisions to grow in facilities at least 15,000square feet in size, in one of the disproportionately impacted areas identified by census tracts as generally low-income urban areas, identified by unemployment rates and cannabis convictions.
The Connecticut Center for Economic Analysis at UConn found in a 2020 study that even measured conservatively, adultuse retail sales will mean increased business growth and “significant” creation of new jobs, especially if the state can beat New York and Rhode Island to open its marketplace.
New York is still developing its adult-sales regulations, while Rhode Island’s new law was signed in May, with sales scheduled to begin as soon as December 1.
Jeff Smith, legal and regulatory reporter for the Denver-based
MJBizDaily, which tracks the cannabis industry, said Thursday that while Connecticut has been thorough in its planning, Rhode Island will start its retail sales industry by letting existing growers and dispensaries go right into
recreation production and sales. New Jersey’s recent shift to adultuse recreational sales took the same path, Smith noted.
Connecticut, on the other hand, has emphasized the social equity aspects of the new industry.
“I think it’s been fairly smooth and efficient in Connecticut so far, but there’s no firm date yet for retail,” Smith said in a phone interview. “They still have a lot to do, with lots of applications for small licenses. Connecticut has one of the best equity programs, with half of the licenses going to those applicants. But people who applied are facing long odds.”
Smith said that the $3 million needed to become a cultivator is “an incredibly” high amount, necessitating a well-funded financial, likely corporate, backer. “It will be interesting to see the kind of partnering up that will be going on,” Smith said. Existing medical marijuana producers can go into adult-use retail for $3 million, as well.
New projections from MJBizDaily formerly called Marijuana Business Daily, indicate that Connecticut’s first full year of sales should range from between $300 million and $375 million, while by the fourth year, sales should range between $650 million and $800 million. Various taxes include the 6.35 percent state sales tax, plus 3 percent taxes for locations that host cannabis businesses and a sliding scale of addition levies based on potency of
THC levels of 10 to 15 percent.
DeVaughn Ward, senior legislative counsel for the Marijuana Policy Project, said Thursday that overall, he’s “disappointed” with Connecticut’s program, including “secret lotteries” while allowing existing medical marijuana operators to get a leg up in the adultretail realm. And while the state Department of Economic and Community Development has a seat on the Social Equity Council, the agency is making investments in large corporate cannabis operations, Ward said.
“It’s a far cry from what many were led to believe,” Ward said, stressing that the results of Connecticut’s cannabis market remain to be seen later this year..
“But on the positive side, Connecticut is no longer spending money to prosecute people for cannabis,” Ward said in a phone interview from Hawaii, where he is working on lobbying that state’s legislature. “And starting Friday, folks who have criminal records for possessing four ounces or less can petition the court for the erasure of criminal records, which is a huge step.”