In some states where medical and/or recreational marijuana has been legalized, local municipalities are given a great deal of leeway in determining what marijuana businesses can and can’t do within their borders. As a result, many municipalities charge a variety of fees and taxes to marijuana-related businesses. They might even prohibit marijuana sales entirely or create insurmountable rules and regulations that create a hostile environment for the marijuana industry.
This month, one of those extortionate schemes was in the news when Mass Medi Spa failed to make a $100,000 community revenue sharing payment to the town of Norwell, Massachusetts. City officials told The Patriot Ledger that the payment was part of an agreement that the town reached with Mass Medi Spa before its license was granted in February 2016. The company has yet to start building the 40,600 square foot dispensary it had planned for the town.
Town officials believe Mass Medi Spa is no longer planning to build that dispensary, and the reason might be the legalization of recreational marijuana that Massachusetts residents voted for in November 2016 coupled with the fact that Norwell, Massachusetts residents voted locally to ban recreational marijuana sales. In fact, regulations have already been passed to prevent recreational sales in the town.
For a business like Mass Medi Spa, operating in Norwell, Massachusetts with a $100,000 community revenue sharing payment doesn’t seem like the smartest decision based on what’s happening with recreational marijuana in the state versus in Norwell. In other words, Norwell has created an environment where even medical marijuana sales are challenging while the next town over might be a whole lot easier and less expensive to do business.
Local Fees and Regulations Can Make or Break a Marijuana Business
Norwell isn’t the only town in Massachusetts that charges marijuana businesses excessive fees to operate within its borders. Last year, a dispensary in Worcester, agreed to pay the town $450,000 over three years and $200,000 every year after that. At the same time, a dispensary in Springfield was negotiating with city officials on a deal that would pay 7% of the dispensary’s revenue plus an annual $50,000 donation to the city’s police department.
Keep in mind, Massachusetts isn’t the only state that allows municipalities to tack on fees and taxes that make doing business in the marijuana industry difficult. In fact, local taxes can vary from 1% and up, and those taxes are in addition to any state taxes that are levied on marijuana sales.
Furthermore, marijuana businesses aren’t just burdened by local fees, they also face barriers to enter and operate in the marijuana industry in the form of local rules. For example, in Denver, Colorado, marijuana businesses must obtain city licenses in addition to state licenses. In addition, Denver has its own medical marijuana code and retail marijuana code. Since local Colorado municipalities can set their own laws and fees for marijuana businesses, every city could work differently, making it very difficult for businesses to navigate the quagmire of rules.
According to Cannabiz Media’s Marijuana Licensing Reference Guide: 2017 Edition, four states allow local municipalities to ban state-license marijuana businesses: Colorado, Oregon, Vermont, and Washington State. Hundreds of communities in Colorado and Washington had issued temporary or permanent bans by mid-2016. Many other states allow local governments to set zoning restrictions, advertising restrictions, and more which limit marijuana sales.
Who Pays the Price?
Ultimately, it’s consumers who pay the price for these extortionate fees, taxes, and regulations – both figuratively and literally. First, patients and consumers have less access to the medical marijuana they need when businesses have too many financial and regulatory burdens to overcome in order to operate within a municipality. Second, the many fees, taxes, and regulations marijuana businesses must pay increase the cost of doing business, which naturally, trickles down to consumers in the form of higher prices. Unfortunately, it’s a vicious circle with no signs of stopping in some states.
What do you think? Should local municipalities be allowed to set onerous rules and collect excessive fees from marijuana businesses? Leave a comment below and share your thoughts.
Susan Gunelius, Lead Analyst for Cannabiz Media and author of Marijuana Licensing Reference Guide: 2017 Edition, is also President & CEO of KeySplash Creative, Inc., a marketing communications company offering, copywriting, content marketing, email marketing, social media marketing, and strategic branding services. She spent the first half of her 25-year career directing marketing programs for AT&T and HSBC. Today, her clients include household brands like Citigroup, Cox Communications, Intuit, and more as well as small businesses around the world. Susan has written 11 marketing-related books, including the highly popular Content Marketing for Dummies, 30-Minute Social Media Marketing, Kick-ass Copywriting in 10 Easy Steps, The Ultimate Guide to Email Marketing, and she is a popular marketing and branding keynote speaker. She is also a Certified Career Coach and Founder and Editor in Chief of Women on Business, an award-winning blog for business women. Susan holds a B.S. in marketing and an M.B.A in management and strategy.