The War on Drugs is no longer a priority, but for the legal cannabis market in New Jersey, the black market poses a threat. But just because you’re a legacy operator doesn’t mean you cannot go legit.
The prohibition of marijuana was so strict that it forced those who wanted to sell weed into illegal markets. This resulted in no tax revenue in this unregulated industry lacking oversight.
Now that legalization is in full effect, many are wondering how they should proceed with their business when there are now two avenues available for them: remain a legacy operator or become part of the legal landscape.
Fortunately, advocates are working hard to bring legacy cannabis business operators in New Jersey to the light. But for some, it’s still going to take some convincing to leap through the regulatory hurdles and take on additional expenses to make their operations legal.
New Jersey’s Legal Recreational Cannabis Market Could Disrupt Legacy Operators
New Jersey’s legal adult-use cannabis market is new and exciting. With the state’s medical cannabis program in place for two years already, legal recreational use of marijuana is set to go live in the state. This will open up the state’s economy to much-need tax revenue, particularly essential following COVID-19’s impact on the state.
The pandemic has ravaged New Jersey. The state’s population is suffering from the spreading illness and its economy is battered by unemployment rates that exceed national averages. But legalization is a beacon of hope that has the potential to refresh the local economy.
Legalization will give the Garden State a way to recoup some revenue from weed sales, whether it be through taxes or other means (such as licensing). It will also give each New Jersey legacy operator the chance to become a legal cannabis entrepreneur.
The state will have an opportunity to undo some of the damage done by prohibition, like new job creation and entrepreneurial opportunities in the cannabis space. It also will offer opportunities to those who’ve been impacted most by the War on Drugs.
“Now is the time to innovate regulation and thoughtfully incorporate legacy operations into emerging marketing in New Jersey and New York,” Dawson explained to NJ.com. “We must learn from their successes and shortfalls, absorb the knowledge and expertise of longtime operators, and offer them a space in the industry, rather than criminalization and exclusion.”
According to Trenton-based consultant, Leo Bridgewater, New Jersey will offer provisions to support minorities. These will include formerly incarcerated people to ensure they have the opportunity to run canna-businesses in the Garden State.
“Cash out, cash in,” Bridgewater explained. “Cash out of the legacy market and cash into the adult-use market. Everyone that I know, I tell them ‘get out of the game, your customers are about to go somewhere.”
If New Jersey provides an amnesty period for legacy operators, this should effectively lead many of these people away from the black market cannabis operations.
“If the state gives an amnesty period where you can come to light in some kind of way, that’s literally turning the legacy market inside out if you think about it,” he said.
New Jersey’s Black Market for Cannabis
New Jersey’s black market for cannabis is nothing new, and some believe legal cannabis taxes will encourage the black market’s operations. This is something we’ve seen in California, and it’s likely to continue as long as illicit dealers are willing to take on the risk.
Legitimate cannabis distributors selling through legitimate channels have reason to worry. The black market for cannabis is still thriving in California, and there’s a good chance it will continue to expand despite the state’s legal weed shops.
“You’re going to get people who don’t know their left from their right and won’t know what to ask. That’s who the state’s going to capitalize on,” DC, a black market cannabis seller, explained to the Asbury Park Press. “But, after a while, it’ll be, ‘Why am I paying taxes on this? Why am I paying double the price?'”
Even though pricing is a pain point for legitimate cannabis distribution operations, that’s the least of someone like DC’s worries. He still has to deal with more risk than those who are legit because his product is unregulated and untested. While it’s more costly to become legitimate, the fact of the matter still stands: there’s more to gain by switching to operate legally.
However, many N.J retailers seem to agree with DC’s sentiment. The reality is that the legal market will inevitably be more expensive than what’s found on the black market, and not everyone can afford to pay a higher price. This competition will result in some consumers choosing the cheaper, more dangerous option. But some advocates are working to displace the illicit cannabis market in New Jersey.
Displacing New Jersey’s Illicit Cannabis Market
Minimizing the illicit market is a difficult-to-achieve goal of all legal cannabis authorities. However, the tax structure currently proposed for New Jersey’s legal cannabis sector is likely to encourage dealers to continue operating outside of the law.
The main factor driving the illicit market’s success in legal states is the tax structures and compliance-related regulations. These taxes and elevated costs of doing business are artificially inflating the price of cannabis and associated products throughout the supply chain.
For example, in Cali, adult-use cannabis became legal on January 1, 2018. But even with the largest addressable market, sales weren’t anywhere near what was predicted. Actually, the sales fell for the year, damaging companies and leaving the state government with a dwindling budget.
But why? Because the taxes throughout the supply chain forced cannabis flower prices to soar nearly 80% higher on the legal market than the average black market dealer was offering.
Advice for Illicit Cannabis Distributors in New Jersey
Each legacy operator in New Jersey should be aware of the risks that come with continuing to operate illegally. As more businesses become legitimate, they’re not going to want to sell to black market operators as they understand they can lose their licenses, have to pay costly infractions, and even face prison time. Thus, dealers will need to determine how they may change their business model accordingly.
With this in mind, some advocates are working to ensure equal opportunities for the legacy market to participate in New Jersey’s legal cannabis sector. To handle the legacy operator issue, Dasheeda Dawson is hosting a five-hour virtual conference, which is presented by Weedmaps.
“Legacy to Legal: Transitioning into a Regulated Cannabis Market” will discuss New York and New Jersey, and how legacy market operators can make the transition to operate within the law. This conference will happen on Friday April 30, from 5 pm to 10 pm, with several notable speakers set to deliver insight.
New York State Assembly Majority Leader Crystal Peoples-Stokes will deliver the keynote. With her experience forming recently legalized cannabis legalization within New York and advocating social equity measures, she’ll present information that will help illicit cannabusiness operators switch to legitimacy.
“We found long and hard for equity-centered legalization that provides investment and restoration to communities battered by the War on Drugs. Now, we must work to ensure that those most harmed by prohibition reap the benefits of the blossoming industry,” Peoples-Stokes explained. “I’m proud to support the Legacy to Legal education series because it brings Black and brown entrepreneurs who’ve been working in the shadows to the table so that they can be part of New York’s adult-use market. In order for legal cannabis to be equitable, we must integrate them into our framework. These events are a powerful start to that process.”
Legacy operators in New Jersey will have a chance to contribute to the legal market as a form of equity. With this in mind, it’s important to keep in mind that legalization will permit legitimate cannabis operations, and advocates are working to ensure each legacy operator will have a chance at success.
New Jersey’s Legacy Operator Assistance
At Northstar, we understand that the industry is evolving. The plant was prohibited, and now that it’s becoming legal throughout the nation, we want to bolster that progress with our services.
Interested in structuring and scaling your cannabis business? Contact us today for expert guidance.
Medical cannabis in Michigan was expanded upon in the summer of 2018 after the state approved eleven new measures for cannabis patients. But is pot legal in Michigan?
Yes. But, as with every other state with legal weed, the Great Lake State has rules that govern it.
This guide provides insight into some of the most common Michigan cannabis business questions we receive and clarifies how the Great Lake State’s cannabis industry will operate. If you have any questions about establishing, organizing, or scaling your cannabusiness in Michigan, we’re here for you.
Interested in scaling your cannabis business in Michigan? Contact us today to learn more about how we can help.
Michigan Dispensary Laws
We recently published an article discussing how to start a cannabis business in Michigan. But once you get past starting a dispensary in Michigan, you’ll need to understand how the laws surrounding these operations work to remain compliant.
In November 2018, Michigan’s voters approved the Regulation and Taxation of Marijuana Act. The state then became the 10th state in the US to legalize recreational cannabis.
While medical marijuana was legalized in Michigan in 2008, the state lacked dispensary allowances. But with the new legislation, Michigan established a framework for licensing and operating medical marijuana dispensaries in Michigan. Michigan calls its dispensary operations “provisioning centers.”
New legislation put the Michigan Marijuana Regulatory Agency (MRA) in charge of overseeing cannabis business licensing in Michigan. At first, they announced they’d only accept license applications from currently licensed medical marijuana dispensary operators for the initial 24 months. However, starting in March 2021, Michigan began accepting applications for recreational cannabis licensing opportunities from ganjapreneurs who’d never held a medical marijuana license before.
Some municipalities chose to avoid participating in Michigan’s legal cannabis sector. However, now, especially with the pandemic’s impact on tax revenue, many are considering allowing recreational cannabis.
Detroit released its rules for licensed adult-use marijuana sales. The city kept social equity in mind to ensure fair opportunity for people from all backgrounds, too.
Detroit legacy applicants, or the people applying who have lived in Detroit for 13 of the last 30 years and are low-income applicants, will receive half of the city’s recreational cannabis licenses. Applicants who’ve been disproportionately impacted by prohibition also receive up to 75% off on licensing fees and properties the city land bank owns.
While there is a purchase limit in Michigan, provisioning centers sell medical marijuana to Michigan residents who have a state-approved medical marijuana patient card. For adult-use marijuana in Michigan, adults who are 21 years of age and older can legally buy, possess, and consume marijuana.
Is home growing allowed in Michigan?
Yes, medical marijuana patients are allowed to cultivate up to 12 cannabis plants at home. Furthermore, the Michigan Regulation and Taxation of Marijuana Act permits the cultivation of up to 12 cannabis plants by adults who are 21 years and older.
Retail Cannabis Licensing in Michigan
What state agency is in charge of cannabis licensing in Michigan?
The Michigan MRA, or Michigan Marijuana Regulatory Agency.
What is the process for obtaining a medical marijuana dispensary license in Michigan?
Michigan medical cannabis dispensaries go by the name “provisioning centers.” The Michigan MRA has a two-step application process for marijuana facility licensing. First, you’ll need to prequalify, which involves a background check of everyone involved with the application.
The next step is to qualify for the license. This involves giving information specific to the type of license you’re applying for, which in this case, is a provisioning center license.
What are the costs surrounding applying for a medical marijuana provisioning center license in Michigan?
Those interested in applying for a medical marijuana provisioning center license in Michigan will have to pay two fees. The first fee in the provisioning center licensing process is an application fee of $6,000. You have to submit this before anyone will process your application.
The other fee is for an annual regulatory assessment. This has to be paid before you receive your license.
What is the process to get a marijuana retail license in Michigan?
The Michigan MRA has accepted applications to get adult-use cannabis facility licenses since November 1, 2019. However, at least at first, the only applications accepted were from people who currently hold a medical marijuana operating license.
On March 1, 2021, the MRA stopped this requirement, which opened the application process to everyone. Social equity qualifying applicants were given discounts on the process, as well.
The MRA uses the same two-step application process it uses for its provisioning center licenses. This involves prequalification, including submission of information, background checks, and an application fee. Then, the MRA conducts a review of the proposed retail establishment, which includes a physical inspection. Applicants must pay a licensure fee upon approval.
Keep in mind that you also might need approval and a license from your municipality.
How much does it cost to apply for an adult-use marijuana retail license in Michigan?
Getting an adult-use marijuana retail license in Michigan has two fees involved. The first is your application fee, which costs $6,000 and has to be submitted before you can get your application processed. After approval for your license, you’ll have to pay a licensure fee for an adult-use marijuana retailer in Michigan, which costs $25,000.
Each year, you can expect to pay between $30,000 and $50,000 for renewal fees. This cost is connected to your gross sales compared to other license holders.
You may have to pay additional fees at the municipal level, as well.
Are there any restrictions on how many licenses one entity can possess?
The state hasn’t and will not limit how many licenses are issued. But local municipalities have the option to limit the type and number of facilities licensed within each jurisdiction.
Cannabis in Michigan 2021
While operating a cannabis business in Michigan in 2021 has impressive potential, it’s crucial to consider all regulations involved. Understanding compliance and maintaining proper bookkeeping practices ensure you never have to worry about costly infractions that could shut your business’ activity long before achieving profits.
Interested in starting, structuring, or scaling a cannabusiness in Michigan? Contact us today for expert assistance.
California cannabis business taxation is in a constant state of motion. With each update, it becomes more crucial to remain up to date on the regulations in place, which is why we’re covering Cali cannabusiness taxes and the latest updates to keep in mind.
Need someone to handle your cannacompany’s financials? Contact us today to learn more about how our fully integrated financial partner model will scale your cannabis business.
California Cannabis Business Tax Information
California Marijuana Tax Update
The California Department of Tax and Fee Administration (CDTFA) has implemented a new online services system that includes cannabis tax accounts. With this in mind, cannabis business operations can now access all of their accounts online 24/7.
California Sales & Use Taxes for Cannabis
California ensures all retail sales of tangible personal property are taxable. However, in some cases, the law might provide specific exemptions. Cannabis and cannabis products fall into the tangible personal property classification and do not have a specific exemption, which means sales of this property are subject to sales and use tax.
California Cannabis Excise Tax & Cultivation Tax Insight
Retail purchasers of cannabis or cannabis products must pay a 15 percent excise tax. This tax is determined in accordance with the average market price of the cannabis or cannabis products as they’re sold in a retail setting.
Furthermore, harvested cannabis has a cultivation tax upon entering the commercial market. This is the responsibility of cultivators, and the tax is based on cannabis weight and category. These are the three categories in place:
Fresh Cannabis Plant
Qualifying for the fresh cannabis plant category means weighing the unprocessed cannabis plant within two hours of harvesting.
The CDTFA must adjust cultivation tax rates annually for inflation. However, Assembly Bill 1872 ensured that cultivation tax rates would remain the same for the entire 2021 calendar year. However, beginning in 2022, the CDTFA plans to adjust cultivation tax rates in California.
Registering for a Sales and Use Tax Account & a Cannabis Tax Account in California
You can register for your sales and use tax account and a cannabis tax account or add your business location to your existing account online. If you already have a username and password, log into your account to register.
To register for your cannabis tax account under your existing username, you’ll click on the More link in the I Want To section. From there, you’ll select the Register a New Business Activity on the Online Services homepage, choosing Cannabis business activities to begin. Then, you’ll enter your information.
Besides registering with the CDTFA to acquire the essential tax permit(s), you’ll also have to get the right cannabis business license(s). Cannabis cultivators get their licenses from the California Department of Feed and Agriculture. Cannabis manufacturers obtain licensing from the California Department of Public Health. Cannabis distributors, microbusinesses, retailers, and testing laboratories receive licensing from the Bureau of Cannabis Control at the California Department of Consumer Affairs.
Business operators also must contact their city and/or county government office to obtain information on which local licenses, if any, they’ll need. Here’s some insight from the CDTFA that should give you a good idea of which permits and licenses you might need:
Seller’s Permit Requirements for Cannabis Businesses in California
If your business doesn’t sell tangible property in California, you don’t need to hold a seller’s permit. But if you need to meet the state’s commercial cannabis licensing application requirements, you’ll still need a certification letter from the licensing agency. This letter explains that a seller’s permit is not necessary.
To get your certification letter, you’ll email the CDTFA this information:
Contact phone number
Description of your cannabusiness activities
Once the CDTFA receives your email, they will review your information. If you’ve provided enough information, you can expect a certification letter mailed to the address you provided. However, if they need more information, they’ll reach out to you directly.
California Marijuana Business Filing and Payments
Sales and Use Tax Return
If you sell cannabis, you’ll need to file regular sales and use tax returns to report your sales. However, even if you don’t have taxable transactions to report, you’ll still have to file your sales and use tax returns. Also, you still must report your activities to the CDTFA.
Cannabis Tax Return in California
If you distribute cannabis or cannabis products, you must electronically file your cannabis tax return with the CDTFA. This is how you’ll report how much cultivation tax and cannabis excise tax you owe. If you don’t have taxable transactions to report, you’ll still have to file your cannabis tax return and report your activities to the CDTFA.
You’ll have to file your cannabis tax return by the last day of the month after the reporting period. Keep in mind, your cannabis tax account is separate from the other accounts you might have with the CDTFA.
Paying California Cannabis Taxes in Cash
Many Cali cannabis business operators pay their sales and use tax or cannabis tax in cash. If this is something you’re considering, you’ll need to contact the CDTFA to arrange the transaction and request an exemption from its No Cash policy.
The CDTFA grants exemptions if a cannabusiness operator must pay in cash to avoid undue difficulties. You can fill out a No Cash Exemption Request form to explain your business’s operations and why you cannot establish a bank account or pay using a cashier’s check or money order. Once your request is approved or denied, the CDTFA will notify you in writing, offering more information on how you should proceed.
Once you’re approved to pay in cash, you’ll need to contact your local office to schedule an appointment to pay at least 21 days before the payment is due. If your estimated monthly tax liability exceeds $20,000 for cannabis tax accounts or $10,000 for sales and use tax accounts, you’ll have to pay by electronic funds transfer (EFT). If you don’t pay by EFT, you’ll be charged a 10 percent penalty. However, if you receive approval to pay in cash, you’re excluded from this EFT requirement.
California Cannabis Business Tax Assistance
We monitor California’s cannabis regulations for our clients, and we’ll stay up to date on them for you too. Contact us today for expert assistance managing your business’s financials.
With more regulation now than ever before, the cannabis sector demands good decisions to succeed. But how to make the best decisions for your cannabis company?
Use this actionable list to ensure your cannabis business decisions guide you through many of the most common challenges in the cannabis sector.
Interested in implementing these actions? Contact us today to learn more about how we can help.
Have a Cannabis Business Strategy in Place
The right cannabusiness strategy should outline your plan going forward, outline present- and long-term business objectives. Since the cannabis sector has so many moving components, you should be able to highlight an area that’s aligned with your company’s strengths.
For example, if you’re operating a cannabis nursery out of Oregon, you might have access to some of the most fertile soil in the US. The Willamette Valley is known for its living soil, and if you can take advantage of that for your grow, you can likely produce high-quality organic products that can compete with top brands.
Checking every box in a niche is challenging. But if you outline where your company fits and why, along with which niches you’ll target today and in the future, you have a better chance of succeeding in the cannabis space.
Even though many cannabusiness operators believe in scaling impressively, some are interested in sustainable approaches. Starting and maintaining a “mom-and-pop” style operation that supports your lifestyle is still a fulfilling option for some.
However, for those interested in a higher potential for revenues operating a larger, commercialized cannabusiness, it’s within the realm of possibilities. This is something that we can help you with.
Looking to scale your cannabis operation? Contact us today to learn more about how our services facilitate and support your growth.
Track & Analyze Key Cannabusiness Metrics
Your key cannabusiness metrics will vary from niche to niche. But one thing remains the same; you’ll use these metrics to show critical success factors. Your metrics should help you identify areas for improvement, along with how aligned you are with your projected operating costs.
For instance, cultivators use various metrics to measure their successes and shortcomings. These usually include average yield, yield per square foot, yield per watt of light, production per acre, fixed costs, variable costs, and stain cultivation. This offers insight into how much product they’re generating, as well as how each variable could be affecting their yields.
Metrics are also necessary for interested third parties, like investors. If you’re seeking investment, potential investors will want to analyze the metrics to evaluate your operation, comparing it to the competition. Your metrics will also add credibility to your operation.
Software for cannabis recordkeeping can work, although the options for accounting software for cannabis aren’t robust enough to handle all aspects. This is why we recommend keeping a log of everything and using Excel or Google Sheets for recordkeeping to all of our clients.
Your metrics allow you to focus on what works by putting the data on display. Rather than growing 30 strains with 25 unsuccessful, cultivators can concentrate on the five successful strains that dispensaries purchase. The same train of thought works for other cannabis operations.
Organize Your Books
As a cannabis business operator, having your financial framework and processes organized facilitates your success. Most of the time, this means hiring a CPA specializing in cannabis.
Cannabusinesses are under more scrutiny from regulators. These governing bodies are usually quite strict with their regulations, dishing out costly infractions without hesitation.
Section 280E makes it challenging for cannabis operations to deduct expenses. This is something that will continue until cannabis is reclassified. Cannabusiness operators cannot write off their rent, payroll, and other common business expenses – unless they have the right cannabis CPA organizing their books and structuring their entities.
Staying up to date on your accounting and finances is an excellent way to outdo the competition. Entities lacking organizational skills are at a financial disadvantage, which is why it’s always important to have your bookkeeping practices on point.
Need help managing your books? Contact us today to learn how your cannabusiness will benefit from our bookkeeping services.
Surround Yourself with the Right People
The right people will support your cannabusiness’s operations. Cannabis experts in various fields will understand what your business is capable of and advise you on sustaining and growing your operations while remaining compliant.
For example, the best cannabis CPA you can afford has the potential to enhance your business’s operations tremendously. This individual will offer value by saving time, energy, and capital that can be used to support the operation in other ways. Since each state’s regulations and taxes for cannabis differ, the right CPA will guide you, allowing you to avoid common errors you may overlook.
Experienced cannabis accountants and lawyers should be your operation’s first investments. Several other roles will guide your cannabis company’s decisions, including finance, marketing, valuation, and other areas. These team members and advisors will offer valuable insight when it’s most important, so it’s crucial to make hires you can trust.
As you look for a solid financial advisor, consider that individual’s long-term vision, as well as their background working with cannabis and planned strategy. What options have they considered? Is he or she only focusing on short-term results?
Advisors who think in the short term aren’t working for your long-term success. They want to work quickly without considering sustainable options that will support your long-term vision. Find people who plan to contribute to your vision and guide you in your decisions with expertise.
Have Cannabis SOPs in Place
We spoke about the importance of cannabis SOPs in the past. But communication and operational procedures are essential for success. Without a firm understanding of your processes, your business cannot operate effectively and efficiently.
Something as basic as purchasing procedures can be the glue holding your endeavor together. Accountability for important transitional tasks should be distributed among more than one person. This is possible through internal controls like signatures, dual-approval, and time logs for purchasing and cash handling.
Inefficiencies in your processes are a time suck, which is also a money drain. Don’t waste your time and money blowing through multiple bookkeepers without an effective system in place. Create SOPs for every aspect of your business where applicable.
Making Decisions for Your Cannabis Company
As you make decisions, know that they will impact your cannabis company’s success in one way or another. Acting, not acting, saying ‘yes,’ saying ‘no,’ it all directs the direction of your business. Simply put, it’s all in your hands.
By making the right choices and taking action, you’ll support your endeavor’s vision – and scale it to reach or even exceed your expectations. But keep in mind that the right team working with you should always be a priority.
Looking for the right team to support your cannabis company’s vision? Contact us today for expert guidance.
Adult-use cannabis is now legal in New Jersey following Governor Murphy signing the New Jersey Cannabis Regulatory Enforcement Assistance and Modernization Act (CREAMMA) on February 22, 2021. Cannabis possession in small amounts has been decriminalized, too. And we’re expecting a successfully regulated cannabis marketplace in New Jersey to come as a result of this legislature.
Legacy operators in New Jersey will also begin to phase out. However, this will take some time.
But besides the new cannabis business developments in New Jersey, there’s a lot to consider by accountants and lawyers. New Jersey business owners interested in running an adult-use cannabis dispensary, leasing property to cannabis business operators, or manufacturing hemp-derived cannabidiol (CBD) products will have federal and state rules to consider.
Once federal legalization happens, the issues revolving around the New Jersey cannabis marketplace will be less complex. However, we could find ourselves waiting years for that to happen.
At this point, fifteen states have legalized recreational cannabis. New Jersey is one of the states to most recently hop into the adult-use cannabis marketplace. Nearly every state has a medical marijuana program, which usually means the state accepts some level of cannabis use.
As we see the politics surrounding cannabis change, the taboo surrounding the herb is beginning to disappear. It’s becoming more common throughout all groups, encouraging the federal change we’d like to see with the Biden Administration.
The Biden Administration’s platform is generally more supportive of rescheduling cannabis. This would take it out of the list of Schedule 1 substances and could open the U.S. cannabis marketplace to begin operating across state borders legally.
We recently saw Vice President Kamala Harris sponsor a bill, the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act. If passed, this would take cannabis from the Controlled Substances Act schedules, which would make tax season easier on cannabis business owners.
The New York Stock Exchange and NASDAQ are also beginning to accept cannabis stock listings. There are now at least 24 cannabis stocks listed, and we’ve observed more U.S. support for cannabis operation development. These efforts will eventually encourage federal legalization to pass.
Interested in becoming established in the New Jersey cannabis marketplace? Contact us today to learn more about how we can help.
Understanding the Differences in Cannabis Operations
Adult-use cannabis business operators face different challenges than licensed hemp business operators. Even though New Jersey state law allows adult-use cannabis businesses to operate, federal law prohibits these endeavors. However, licensed hemp businesses are legal under New Jersey state law and federal law. It’s crucial to consider the issues surrounding operating a business going against federal law, though.
Cannabis businesses in New Jersey will become increasingly common over the next few years. We’re going to need CPAs and attorneys working together to handle the issues surrounding these operations. Something as simple as getting the appropriate retail license will require a would-be business owner to apply and prove the financial ability to sustain the business.
The main issue here is that the majority of startups operating in cannabis must operate on a cash basis. Since many banks are reluctant to give traditional financial or banking services to cannabis business operators, this is a hurdle that takes some ingenuity to overcome.
Banks are reluctant because most of them are insured federally. This means federal regulators oversee them and their operations, and they must comply with federal regulations. Of course, this includes federal laws prohibiting cannabis business operations. Thus, at this point, we’ll have to find other methods of obtaining these services until federally regulated banks receive protection.
One such legislation that offers protection, the SAFE Banking Act, exemplifies what’s possible. The SAFE Banking Act ensures federal banking regulators cannot:
Terminate or limit deposit insurance when a bank provides financial services to cannabis-related legitimate businesses or ancillary service providers.
Prohibit, penalize, or discourage banks from providing financial services to cannabis-related legitimate businesses or ancillary providers.
Recommend, incentivize, or encourage banks to avoid offering, downgrade, or cancel financial services because the business operates in cannabis.
Take adverse action on loans given to a cannabis-related legitimate business or its employee, owner, or operator, nor against an owner or operator of equipment or real estate that’s been leased to cannabis-related legitimate businesses.
While limited, these protections have made operating legitimate cannabis businesses easier. However, these provisions aren’t enough; we still need federal legalization to happen for the New Jersey cannabis marketplace to work as effectively as possible.
We expect New Jersey’s Cannabis Regulatory Commission (CRC) to create another round of applications for cannabis licenses within six months of the February 22 legislation. While there’s a lot of work to be done, we won’t know what the process is like until the new legislation is released.
At this point, we have six main classes of licenses available under CREAMMA. These include Class 1 Cultivator license, Class 2 Manufacturer license, Class 3 Wholesaler license, Class 4 Distributor license, Class 5 Retailer license, and Class 6 Delivery license. While these license offerings will set the foundation for New Jersey’s cannabis marketplace, we’re still in the dark as to how many of each type of license will be offered during this initial round of licensing.
Key Differences Between Cannabis Products
The New Jersey cannabis marketplace will have to consider product differences. For instance, federal law bans marijuana, which is cannabis containing beyond 0.3 percent of tetrahydrocannabinol (THC). This is the psychoactive cannabinoid (cannabis compound) found in cannabis.
Since THC is still listed on the Schedule 1 drug list, marijuana containing beyond 0.3 percent THC is prohibited federally. With this being the case, it’s crucial to know the difference if you’re considering becoming involved in the newly-formed New Jersey cannabis marketplace.
If you’re planning for your cannabis business to operate across state lines, it’s vital to consider state and federal issues. While you cannot cross state lines while carrying or distributing marijuana, you can do so with hemp. The main difference is that hemp doesn’t contain beyond 0.3 percent THC.
For instance, if your company purchases hemp from Florida, you can bring it to another company in Georgia. But if you plan to do this, you’ll need to have the right source documentation, meaning lab certifications. This is how you’ll be able to prove and substantiate that everything you’re traveling with is hemp or hemp-derived.
Getting Involved in New Jersey Cannabis
Interested in establishing your cannabis business in New Jersey? Contact us today for expert assistance.