Bill outlines plan to legalize cannabis sales in Maryland by July 1

Published on: February 03, 2023 1:44 PM EST|Updated on: February 03, 2023 6:19 PM EST

Behind the scenes at cannabis grow farm SunMed
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Both chambers of the Maryland General Assembly on Friday introduced a bill charting the state’s course for opening a recreational cannabis market this summer.

The expansive legislation, which tackles a host of commerce-related issues, including safety regulations, taxes and licensing equity, comes months after voters overwhelmingly passed a constitutional amendment legalizing recreational marijuana.

The 88-page bill levies a sales tax on the recreational product, sets inspection regulations and outlines license eligibility.

Senate President Bill Ferguson in a Friday news conference said legislators put together an “intentional, thoughtful framework” around a complex topic, one he said could become a national model.

“What I do believe we’ve done effectively here is put us on the best path possible,” Ferguson said.

Ferguson said the bill will regulate the safety of cannabis, ensure equity in an expanding marketplace and invest 30% of tax revenues in communities ravaged by the war on drugs.

The Baltimore City Democrat anticipated that differences are bound to arise among legislators on such a large bill, “but we’ll work it out,” he said.

Through his spokesperson Carter Elliott IV, Gov. Wes Moore praised the bill as “a well-crafted piece of legislation” and said he is “looking forward to future collaboration with the legislature.”

Ensuring opportunity in the new market

One of the bill’s “driving principles,” Ferguson said, was to ensure Marylanders can buy recreational cannabis on July 1. That’s the date that the constitutional amendment approved last year lifts criminal penalties for recreational use and possession of up to 1.5 ounces of cannabis.

Ferguson’s colleague, House Speaker Adrienne A. Jones, said the bill’s crafters were able to prioritize equity and still meet the July 1 deadline.

“We managed to do both and developed a robust bill that will level the playing field for historically disenfranchised communities,” the Baltimore County Democrat said in a statement.

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In order to make this happen, medical cannabis companies can pay a fee to convert their license to a recreational one, ranging from $100,000 to $2.5 million, based on the amount of the company’s current revenues. Companies that got started after Oct. 1, 2022, would pay lower fees to convert to the new licenses.

With the proceeds, the legislature will meet another one of its goals: ensuring market access for new businesses and diverse participation in the industry. Proceeds from the fees will seed new businesses, ensuring entrepreneurs get a foothold in the new economy.

Bill co-sponsor Del. Vanessa Atterbeary said the state must get the equity part right. She noted how when medical cannabis was legalized years ago, the first batch of licenses went to a mostly all-white panel of entrepreneurs.

“What we don’t want to do is what happened in medical‚ and what we don’t want to do is put minorities behind in this billion-dollar industry for years and years to come,” Atterbeary said. “Because there will be no opportunity to catch up.”

Nationally, only 2% of cannabis industry participants are minorities, said Del. C.T. Wilson, one of the lawmakers leading talks on the bill. The goal in Maryland is to get to 30% within one year, he said.

”We’re going to be representational of Maryland and that is our goal: to make sure that we provide access to all Marylanders, minorities included,” Wilson said.

The bill will propose 120 new dispensary licenses, 25 licenses for growers, 25 licenses for processors. But the equity will show up during the application process. Applicants for the recreational licenses must show that they either lived in a “disproportionately impacted area” for five of the last 10 years or attended five years in public schools in that area.

Asked about the possibility that there could be lawsuits over the licensing process, Wilson acknowledged that’s always a possibility with an emerging industry. But he said he’s confident that the industry will be up and running by July 1.

”We can’t miss that date, because July 1 is when they voted for it, so we have to have it ready,” Wilson said.

Otherwise, he said Maryland might run into a problem like that seen in New York, where cannabis is legal but there’s not a regulated industry in place.

The recreational product will be taxed

Unlike medical cannabis, lawmakers will levy a sales tax on the recreational product. One of the main purposes for taxing cannabis is to make sure the state can regulate the market and inspect the product to make sure it’s safe, Wilson said.

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

Atterbeary and Wilson said the only tax on cannabis will be a point-of-purchase tax paid by the consumer, much like the sales tax. Local governments will not be allowed to tack on their own local taxes, Atterbeary said.

The sales tax on cannabis products will be 6% when sales start on July 1. Each year after that on July 1, the tax rate will increase by 1%, topping out at 10% starting on July 1, 2027, according to the bill.

A critical objective of the tax structure is to squash illegal sales, Wilson said.

”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,” the Charles County Democrat said.

Del. Jason Buckel, the Republican minority leader in the House, said members of his party will be going over the details of the bill, particularly to make sure that the provisions for diversity in the industry are legal.

Republicans are interested in diversity, Buckel said, but he believes some states have gone too far in setting aside licenses for minority companies and finding themselves in legal trouble.

”We’re certainly not opposed to efforts to get small- and minority- and women-owned businesses up and running in the industry,” said Buckel, who represents Western Maryland. “We want everyone to have the same fair chance to be part of something that’s now legal, but you’ve got to do it in the right way.”

Republicans are concerned, too, Buckel said, about the high fees that medical cannabis companies will have to pay in order to join the recreational cannabis industry.

A trade association representing licensed medical cannabis companies thanked lawmakers for their work on the Cannabis Reform Act and supported the “urgent work ahead to build additional social equity and diversity in expanding a well-regulated Maryland cannabis industry.”

Joy Strand, the executive director of the Maryland Wholesale Medical Cannabis Trade Association, said in a statement that her group “looks forward to engaging on these critical issues with the Maryland General Assembly, the Governor and Maryland regulators in the weeks and months ahead.”

Now that the bill has been introduced, there will be committee hearings and discussion around the finer points of the bill ahead of the final votes and before landing in front of the governor.

In the meantime, lawmakers are also considering possible alterations to criminal laws after the state legalized a formerly illegal substance. One bill before members would no longer allow law enforcement to search someone if they smell cannabis. Another bill would expunge past cannabis convictions after a gubernatorial pardon.