New Michigan marijuana taxes, the inventory market prompt to stimulate funding by minority corporations

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Michigan regulators are proposing new taxes on marijuana, including a 3% excise tax on medical marijuana sales and a 1.5% tax on all business-to-business transactions.

Medical sales tax revenue could generate nearly $ 12 million a year just from the pace of medical sales in December, with the primary goal of promoting and funding new minority-run marijuana businesses.

Officials have not disclosed how much additional revenue the proposed business tax would generate, although it is likely to be substantial. Combined medical and recreational sales for the last month of 2020 were over $ 100 million.

Michigan, like other states, has struggled to include black and brown entrepreneurs in its fledgling recreational market since it launched in December 2019, and neither in the medical market, which began in 2016.

Based on a December survey by the state marijuana regulator, around 3.8% of existing licensed recreational cannabis companies hold black and 1.5% Hispanic stakes. Black and Hispanic communities make up 19% and 5.3% of Michigan’s population, respectively, based on the latest US Census estimates.

When Michigan voters passed the marijuana recreational marijuana polling initiative in 2018, legal language that mimicked efforts in other states like California called for “social justice” within the industry. The idea was that minorities and low-income communities suffered most from the marijuana ban and should therefore benefit from its legalization.

State lawmakers have tried to combat some of the lingering effects of the ban by simplifying the deletion process for certain marijuana-related crimes. However, figuring out how to include black and brown residents in the commercial boom in marijuana sales has proven to be more difficult.

Most in the industry support the concept, but it has been difficult to realize the equity aspirations in the tightly regulated, highly competitive, and highly developed industry that requires huge injections of cash to start.

Andrew Brisbo, director of the Marijuana Regulatory Agency, founded the Racial Equity Advisory Workgroup in June to help remove some of these barriers. The findings and recommendations were revealed in a report released on Martin Luther King Jr. Day.

“Access to capital was one of the critical issues,” Brisbo said on Monday. “The question was really how to solve this problem.”

The Michigan Cannabis Industry Association, Michigan’s largest marijuana trading organization, said it supported most of the recommendations but “strongly opposed” the tax hikes.

“The (Michigan Cannabis Industry Association) is clearly opposed to any tax increases in the retail and medical markets,” said Anquinette Sarfoh, director of the Michigan Cannabis Industry Association and representative of the Racial Equity Advisory Workgroup. “We should focus on cutting costs and this proposal will only serve to get patients into the illicit market.”

“As a cannabis patient with multiple sclerosis, the idea of ​​adding another financial barrier between patients and their medicine is hideous.”

The 30-page report contains numerous recommendations that could have a major impact on retail prices and business costs. Many of the proposed changes still have a long way to go before they become a reality. Some require administrative changes, others require legislation.

Some highlights are:

3% excise tax on retail sales of medical marijuana: the tax revenue would be divided as such: 25% between the cities, towns or villages where the sales take place; 30% to the county where the sales take place; 5% to the county sheriff; 10% to a newly created Michigan Marijuana Research Fund that would fund studies by companies during their normal operations; and 30% for the newly created Michigan Social Equity Capital Investment Program.

1.5% excise tax on all in-house transactions: The new tax would apply to both medical and recreational transactions. This would include, for example, a new tax on the sale of harvested flowers from a grower to a processor for the manufacture or packaging of retail products. The proceeds would be divided as such: 30% to the city, 20% to the county and 20% to the school district in which the company generating the tax is located; 20% to the Social Equity Investment Fund; and 10% do medical marijuana research.

Michigan Marijuana Market Intrastate Stock Exchange: The state would create its own, self-contained stock market that would allow Michigan investors to invest in Michigan-based startups owned by Black or other minority residents. Based on the laws in force, the startup companies could raise up to $ 2 million in a year. The state-hosted exchange would then allow brokers to buy or sell the stocks with a maximum fee of 5% per transaction.

“The stocks are considered … ‘sticky’, not easy to sell, so long-term growth should always be expected and investors should hold stocks at least until the end of the offering,” said the proposal report. “Residents would be limited to investments of $ 10,000.”

Continuing Education: The state would establish a required training certification program for employees in the marijuana business, for both recreational and medical purposes. Leaf Medic, a federally accredited marijuana vocational school; state colleges and universities; The state Ministry of Labor and Economic Opportunities and educational institutions would offer training in the medical use of cannabis.

The proposal provides two hours of classes per year for all marijuana entrepreneurs and employees.

Joint Venture Pathways Program: A non-profit organization similar to the existing Michigan Minority Supplier Development Council is to be created to strengthen trade opportunities between established marijuana companies and minority-owned companies. The program would allow interested business owners to work with established companies through a mentoring program to learn more about raising capital and running a marijuana business.

“The model would be similar to the Bizdom U created by Dan Gilbert and Goldman Sachs 10,000 Small Business Program (Quicken Loans),” the proposal said.

New Microbusiness License: The state currently has a standalone “microbusiness” license that allows licensees to grow, process, and sell products made with marijuana harvested from up to 150 plants. A new state license for Class A microbusiness would increase the number of mature microbusiness facilities to 300. It is even more important that the company can also interact and exchange information with other market participants, which is currently not permitted.

The new micro-enterprise could buy mature plants from existing licensed growers and allow processors to package and manufacture products such as food or oils for processors.

This type of corporate license is more attractive to smaller companies with less initial investment capital.

Clinical Research: Using funds from current and proposed taxes and sales, the state marijuana regulator, in coordination with the state Department of Health and Human Services, hospitals, universities, marijuana trade organizations, and other health lawyers, would create clinical research programs to benefit licensed marijuana business that would help with research.

Studies would focus on the identification and manufacture of disease-specific strains and products of marijuana.

The full report from the Racial Equity Advisory Workgroup can be found here.

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