October 2019 Update:
Based on news accounts that the bill to legalize adult use of recreational marijuana may again see action in the “lame duck,” that is the period after the election and before the end of this legislative term in January, we are again providing these analyses. The post below reflects the original March 20 blog post and a 2nd post that same day.
March 2019 Update: On March 25, these bills were HELD from a vote because of a lack of necessary support for passage. The legislation could be rescheduled in May.
This is the first in a series of posts that will focus on particular sections and provisions of interest to local governments in S2703, legislation which will legalize the adult use of recreational cannabis. The legislation is scheduled for final votes in both the Assembly and Senate on Monday, March 25.
According to press accounts, however, the final passage is far from certain.
Section 21. Local Cannabis Taxation; Local Cannabis Transfer Tax and User Tax, Pages 54-56.
Link: https://www.njleg.state.nj.us/2018/Bills/S3000/2703_U1.PDF
This section authorizes municipalities to adopt ordinances imposing a “transfer tax” on cannabis sales on licensed cannabis establishments (see definition in Section 3, page 4, lines 13-16).
Municipalities may enact a local tax up to:
- 2% of the receipts from each sale by a cannabis grower, cultivators (Class 1 license);
- 2% of the receipts from each sale by a cannabis processor (Class 2 license);
- 1% of the receipts from each sale by a cannabis wholesaler (Class 3 license); and/or,
- 3% of the receipts from each sale by a cannabis retailer (Class 4).
Thus, the municipality may enact the appropriate transfer tax on any of the licensed cannabis establishments located in the municipality.
These taxes are in addition to the State cannabis excise tax of $42 per ounce. Please note that no local transfer/user tax can be imposed on medical marijuana.
Per Section 22 (starting on page 56, which will be subject of a later post), the municipality may prohibit any or all of the 4 licenses within 180 days of the effective date of the Act.
For those who do not opt-out, the local tax ordinance shall also include provisions for imposing a user tax, at the equivalent rate(s) set by the municipality, on any “concurrent license holder…operating more than one cannabis establishment.” This language clarifies earlier concerns about the tax on businesses that holds more than one license within the municipality, commonly referred to as a vertically integrated operation.
Receipts from the transfer and user taxes shall be remitted by the cannabis establishment directly to the Chief Financial Officer of the municipality, in a matter proscribed by the municipality.
If there is nonpayment of the transfer/user tax, then the unpaid balance and accrued interest shall be a lien in the same manner as other unpaid municipal taxes, fees, and charges.
Section 22, Local Government Entity Regulations or Ordinances, Pages 56-58.
Link: https://www.njleg.state.nj.us/2018/Bills/S3000/2703_U1.PDF
This section authorizes municipalities to enact regulations governing the time of operation, location, manner and the number of cannabis establishments, as well as establish civil penalties for the violation of such ordinances and regulations.
A municipality may prohibit any one or more classes of cannabis licenses throughout the municipality, even if the municipality is within regions such as the Highlands, the Meadowlands or the Pinelands. In other words, a municipality could adopt an ordinance prohibiting retail establishments but permit cultivation operations.
On page 57, lines 11-14 it reads, “Only an ordinance to prohibit one or more classes of cannabis establishment enacted pursuant to the specific authority to do so by this section shall be valid and enforceable.”
Thus, any existing ordinances banning commercial marijuana sales or transactions will be null and void and the municipality will need to adopt a new ordinance to do so, which should reflect and reference this section of the law.
Municipalities will have 180 days from the effective date of the Act to opt-out, by ordinance, of any one or all licenses. The League will prepare and make sample ordinance language that can be altered for your specific purposes.
To illustrate:
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OPT OUT
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Deadlines/Timeframe
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Consideration/Reconsideration
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180 days to pass ordinance to opt-out of any one or all class or classes of the business.
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Can “opt-in” at any time.
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After 5 years, need to act again, either to pass again the same ordinance or to amend accordingly.
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OPT IN
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Deadlines/Timeframe
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Consideration/Reconsideration
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Take no action within 180 days of the Act
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Permitted Use in all industrial zones: growing, cultivating, processing and selling and reselling of cannabis and cannabis items by a grower, processor or wholesaler;
Conditional Use in commercial or retail zones, subject to meeting conditions set forth in local zoning ordinance or upon granting of a variance: retails sales.
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Cannot reconsider until 5 years, when municipality may choose to opt-out of one or more licenses; existing license holders grandfathered.
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Nothing in bill prevents municipality opt-in by ordinance; affirmative action may be preferred to assess local conditions and opinions.
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It is our understanding and that if you opt-out within 180 days of the effective date of the Act, you may opt-in later by ordinance.
When the State regulatory commission receives an application for initial licensing or renewal for any cannabis establishment or an endorsement for a cannabis consumption area, it shall notify the municipality within 7 days of the application, unless the municipality has already prohibited the class of license. In turn the municipality must determine and inform the Commission if the application complies with the local regulations regarding time, location, and manner of operations and number of establishments.
The bill language also clarifies that the municipality may impose a local license requirement or endorsement requirement.
If and when this legislation becomes law, we would recommend a review of your zoning ordinance to make sure they comport with the opt-out/in provisions.
Section 82, Cannabis Consumption Area, Pages 170-175
Link: https://www.njleg.state.nj.us/2018/Bills/S3000/2703_U1.PDF
A municipality may authorize, by ordinance, the operation of locally endorsed cannabis consumption areas by a cannabis retailer or an alternative treatment center for onsite consumption of personal/medical use cannabis.
Such an area may be indoor or outdoor, provided it meets the statutory criteria as defined through Section 82.
A local cannabis consumption area may not be allowed within 1,000 feet of a boundary with an adjoining jurisdiction that does not permit retail cannabis.
The State Commission may only issue an endorsement after receipt of written approval of the local government.
Contact:
Michael F. Cerra, Assistant Executive Director, mcerra@njlm.org; 609-695-3481 x120.