New York Marijuana Business

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New York Marijuana Licensing >

What is the Demand for Marijuana in New York?

The cannabis legislation in New York State signed into law in March 2021, allows New Yorkers to possess and use up to 3 ounces of cannabis. However, sales of recreational-use marijuana will not become legal for an estimated 18 months until the state draws up regulations. The law allows the use of cannabis in public spaces while smoking or vaping of marijuana is prohibited in certain places such as workplaces, colleges, universities, hospitals, and within 100 feet of a school.

Although it may take a while for the cannabis marketplace to set up, estimates by the Office of the Governor indicate that the state's legal cannabis program could generate between $3.5 billion and $4.2 billion a year. Forbes - an American business magazine, puts illicit marijuana sales in New York at $3 billion annually. Per the New York marijuana legalization impact assessment report, fiscal estimates for legal marijuana are in part based on reviews of illegal pot sales in New York, where dealers charged about $270 per ounce for medical quality strains and $340 per ounce for high-quality strains.

The legal cannabis market in New York State is already projected to be second only to the cannabis market in California. Recreational use of marijuana is expected to require more than 600,000 pounds of cannabis and even outpace existing marijuana businesses' capabilities. Several existing marijuana businesses are already planning on expanding the number of their dispensaries and their cultivation and manufacturing facilities to meet up with expected demands.

While expected cannabis sales and tax revenues are projected to be high for New York, the total sales and taxes after the first first year of legalizing recreational marijuana are much lower. The lower totals are blamed on slower than expected rollout of the state’s recreational marijuana program as well as higher than expected cost of the program. While the New York Governor promised an annual marijuana revenue of $56 million in a 2023 fiscal spending plan released in December 2022, the state only generated $12.6 million in cannabis tax between March 2022 and March 2023. This is even lower than the $12.9 million in taxes generated between March 2021 and March 2022.

How is Marijuana Taxed in New York?

There are typically multiple levels of taxation across a marijuana supply chain. Marijuana sales are taxed in various ways by states, including license fees, excise taxes, and sales taxes. The majority of revenues are produced through sales taxes assessed on retail transactions, excise taxes levied on retail sales, or excise taxes levied on producer or grower sales to retailers.

Retail marijuana tax was initially set at 20% by Governor Andrew Cuomo; however, that has been reduced to 13%. More precisely, the 13% figure comprises a 9% state tax and a 4% local tax. The local tax is split with 1% going to the counties and 3% going to the municipalities where these marijuana tax revenues are generated.

New York's taxing scheme is quite different from those used in other states where recreational marijuana has been legalized. While other states have based wholesale tax on factors such as weight and volume, New York State plans to tie wholesale tax to the amount of the psychoactive compound - Tetrahydrocannabinol (THC) in marijuana products. New York will be the first state in the United States to tax THC levels in this manner. Note that the state's marijuana legalization impact assessment published in 2018 used tax estimates between 7% and 15%.

In addition, Article 20-C of the Tax Law for adult use of marijuana stipulates that a tax must be paid by a distributor to an adult-use retailer based on the THC level in the product. Cannabis flower is taxed at the rate of half-cent per milligram of the amount of total THC, as reflected on the product label. Concentrated cannabis is taxed at the rate of eight-tenths of one cent per milligram of the amount of total THC, as reflected on the product label. Cannabis edible product is taxed at the rate of three cents per milligram of the amount of the total THC, as reflected on the product label.

The New York Marijuana Regulation and Taxation Act (MRTA) divides the remaining marijuana tax revenue, after deducting the administrative expenses incurred by state agencies for cannabis regulation, in the following ways:

• 40% to the State Lottery Fund for Education

• 40% to the Community Grants Reinvestment Fund, which would be used to support the social and economic equity programs as established by the appropriate authorities.

• 20% to the Drug Treatment and Public Education Fund, which would finance additional drug treatment programs, health care services and programs, as well as public health campaigns to teach the public about responsible cannabis use

Under the MRTA, New York imposes a 7% excise tax on medical marijuana. All the taxes collected from marijuana sales goes to the New York Medical Cannabis Trust Fund. The Office of Cannabis Management published a breakdown of the allocation of the medical cannabis tax collected in the state as follows:

• 45% to the New York State Cannabis Revenue Fund

• 22.5% for the New York counties where the medical cannabis sold was manufactured; this is allocated in proportion to the gross sales of the medical cannabis manufactured in each such county

• 22.5% to the counties where the medical cannabis was dispensed; this is allocated in proportion to the gross sales occurring in each county

• 5% for OASAS (Office of Addiction Services and Supports), to use for drug abuse prevention, counseling, and treatment services

• 5% for the Division of Criminal Justice Services, to disburse to state and local law enforcement agencies with need for additional funds to properly administer the state's cannabis laws

What is the Agency Taxing Marijuana Businesses in New York?

The Marijuana Regulation and Taxation Act (MRTA) signed into law on March 31, 2021, establishes the Office of Cannabis Management (OCM) within the Division of Alcohol Beverage Control. The Office of Cannabis Management was established to set standards, license, inspect, and enforce the laws concerning marijuana businesses. The OCM will oversee and regulate the recreational cannabis market in New York State. It will act as an independent agency and will operate alongside the New York State Liquor Authority. It comprises a five-member board, with three members appointed by the governor and one member appointed by each house of the State Legislature.

To contact the OCM, visit:

The Office of Cannabis Management

The Division of Alcohol Beverage

163 W 125th Street

New York, NY 10027

Phone: 1-888-OCM-5151 (1-888-626-5151)

Email: info@cannabis.ny.gov, press@cannabis.ny.gov