5 takeaways from Maryland’s big bill to legalize cannabis sales

Published 2/4/2023 6:00 a.m. EST, Updated 2/6/2023 12:20 p.m. EST

Behind the scenes at cannabis grow farm SunMed

One of the more prominent pieces of cannabis legislation expected this session — a bill that would set up a system for taxing, regulating and licensing the product for adult recreational use — was jointly introduced in the Senate and the House of Delegates Friday.

The bill comes after more than two-thirds of state residents voted to pass a constitutional amendment to legalize recreational marijuana use and possession in November.

Distribution licenses in Maryland will be awarded with an eye on equity

Medical cannabis distributors will be able to pay a fee — determined by the company’s revenue — to convert their license to a recreational one.

Priority will be given to those who qualify for equity licenses. These applicants must have gone to school in, or lived in — for at least five of the last ten years — areas disproportionately affected by the war on drugs. 25 licenses will be distributed for growers; 25 will be distributed for processors; and 120 will be distributed for dispensaries.

A second round of licensing, that would include 70 growers, 70 processors and 125 dispensaries, may take place if there is not adequate minority representation in the pool. This round would specifically identify Black and Hispanic businesses and investors to receive licenses.

The goal in Maryland is to get to 30% of licenses owned by minorities within one year, said Del. C.T. Wilson, a Charles County Democrat who cosponsored the bill.

Maryland’s plan tries to include those affected by past cannabis criminalization

The bill offers pathways to help entrepreneurs break into the newly legal cannabis industry by offering grants and loans to individuals who have historically been disproportionately impacted by the criminalization of cannabis. Those who have been convicted of cannabis use-related crime will also be offered this assistance.

“The goal in Maryland wasn’t to get our Marylanders high, it was to take cannabis out of the criminal stream of commerce, protect young Black men from being arrested and dying, and additionally, give back to the communities that are most disproportionately impacted by the war on drugs,” Wilson said.

Maryland will impose only one type of tax on cannabis

The sales tax on cannabis products would be 6% when sales start on July 1. The tax rate will increase by 1% each subsequent year, reaching a limit of 10% starting on July 1, 2027, according to the bill. That rate would match Michigan, Nevada and Rhode Island, and would be far less than the 37% sales tax in the state of Washington, according to the Urban Institute.

Unlike many states, Maryland will only have a point-of-purchase tax and will not levy any local sales taxes, taxes based on weight or potency of the cannabis, or excise taxes (taxes on a specific product, often paid by businesses).

Tax revenue from Maryland’s cannabis industry would be reinvested in the community

About one-third of tax revenue from the cannabis industry will be reinvested in an effort to “address health, economic, and racial disparities” in communities that have been disproportionately impacted by the criminalization of cannabis.

“That is a very, very intentional part of the bill, is that the revenues that are generated can go back into communities that have been negatively impacted,” said Senate President Bill Ferguson, a Baltimore City Democrat, during a Friday news conference. “The money will go towards helping businesses to open and helping to invest in community development projects, affordable housing initiatives, really empowering individuals who live in those communities to do the things that they know best will help to empower their neighbors.”

There’s money to be made in Maryland’s cannabis …

… but not so much for the state.

The cannabis industry, Wilson said, could bring in more than $1.5 billion during the first year and a half. But that money will largely stay within the industry.

“This is not a moneymaker for Maryland. It was never intended to be a moneymaker for Maryland,” Wilson said.

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