Is Weed Legal in New York?

Is Weed Legal in New York?

Consumers and interested business operators in New York are all wondering whether or not marijuana is legal in New York.

The short answer is “yes.”

But what does this mean for consumers and cannabis business operators interested in the state’s newly-formed recreational marijuana space?

This article will serve as a guide for consumers and business operators interested in adult-use marijuana regulation. Let’s go over what’s happening in New York now that New Yorkers can buy, possess, and sell marijuana.

Looking to scale your legal cannabusiness in New York? Let Northstar lead the way!

Grow your operation in this budding industry now. Contact us now to speak with one of our experts about how our financial services will help.

weed is legal in new york

Marijuana is Legal in New York, Now What?

According to a statement given by Governor Cuomo, “Legalizing cannabis was the first step in this historic endeavor to right the wrongs of the past.”

Whether you’re a consumer or interested in operating a cannabis business in New York, you’re going to have to wait until 2022 to experience the state’s full-fledged recreational cannabis sector. But equally important to know is that medical cannabis is still legal, and New Yorkers 21 years of age or older are allowed to possess and consume recreational marijuana.

Cuomo's Signature Effectively Changed New York

Cuomo’s Signature Effectively Changed New York

Governor Andrew Cuomo signed the Marijuana Regulation and Taxation Act (MRTA) that legalized adult-use marijuana for New Yorkers on March 31, 2021. This expanded New York’s medical marijuana program, effectively adding to the list of medical conditions that qualify New Yorkers for medical marijuana.

What’s Allowed?

At this point, the program does not allow cannabis flower. But this new update might lift flower prohibition.

Most importantly for consumers, possession is no longer a crime. Since legalization, personal possession of cannabis, up to a certain weight, is permitted. So for those who enjoy smoking a bit here and there – or a lot – the new laws aim to decriminalize possession and ensure that personal smoking and consumption are no longer criminal offenses.

how much weed can consumers possess

How Much Can Consumers Possess?

The laws allow New Yorkers to possess as much as three ounces of cannabis or up to 24 grams of concentrated cannabis. But just because consumers can hold ounces up to 3 ounces of cannabis or 24 grams of concentrated cannabis for personal use doesn’t mean they will.

The law now allows possession. With this being the law that was historically used to target people of color, it’s incredible to see this shift with legalization.

We no longer have to worry about people getting stopped by the police for smoking a joint. This legislation even makes public consumption legal in areas people smoke cigarettes.

People can also make their own concentrated cannabis if they decide to grow up to three mature cannabis plants and three immature cannabis plants as part of the home cultivation allocation.

That’s right. New Yorker natives are even allowed to grow several plants per household as part of home cultivation. While federal law doesn’t allow it, the state allows a certain number of plants per household.

So, if a local decides to grow and make concentrated cannabis, it’s legal at this point. However, once businesses begin operating, it’s likely that most consumers will search for a local dispensary.

Simply put, New York natives can now grow cannabis at home. Delivery services are allowed, and consumption lounges will be a part of New York’s cannabis legalization.

Let’s not forget that criminal records will get expunged. All in all, marijuana-related businesses and consumers have a lot to gain from this new law.

The Marijuana Regulation Mission in NY police lights

The Marijuana Regulation Mission in NY

With marijuana regulation in New York, the mission is to promote social equity. This is why the law will encourage social equity applicants to obtain 50% of the licenses.

Social equity applicants include New Yorkers who come from communities that have been disproportionately impacted by the War on Drugs, service-disabled veterans, women, and small distressed farmers.

Cannabis products will have a 13% sales tax placed on them. This includes 9% to the state and 4% to the local municipality. There will also be an excise tax aligned with how many milligrams of THC is in the marijuana products.

The new bill also created the state’s Office of Cannabis Management, along with a Cannabis Control Board. These two entities will be in charge of regulating the cannabis space in New York.

New York Office of Cannabis Management

The MRTA established the Office of Cannabis Management. This agency will implement a regulatory framework for the state’s cannabis and hemp space.

So far, the Governor estimates that the agency has taken in $83 million in tax revenue from retail throughout 2021, and he expects this to increase to $300 million by the time its provisions are fully implemented for adults interested in buying the drug in 2023.

OCM Website Launch

The Office of Cannabis Management launched its website in April 2021 to offer resources to consumers and business operators in the cannabis space. This website offers information on the regulatory structure of the Office of Cannabis Management, which, along with the Cannabis Control Board, will handle the licensure, production, distribution, sale, cultivation, and taxation of all adult-use and medicinal weed within the state.

Through this website, New York residents can find medicinal cannabis practitioners, caregivers, and IDs. But what’s more is the fact that retail businesses and other operations looking for licenses to participate in the state’s adult-use, medicinal, and cannabinoid hemp industries can find more information there.

New York Cannabis Control Board

New York’s Cannabis Control Board is still waiting to be formed. At this point, there’s a hunt underway for CCB members.

Once the board is ready, it will start to build out the details of the state’s cannabis space. But for now, we don’t have much to go on.

Here’s a quote from the Deputy Communications Director, Jason Gough:

“The administration is actively working to ensure the OCM and the Cannabis Control Board can begin implementing a safe, equitable, and transparent adult-use cannabis industry as soon as possible. The Governor is committed to appointing individuals with diverse experiences and subject matter expertise, who are representative of communities from across the state.”

Once established, the CCB will handle all areas regarding the state’s cannabis sector, including the packaging, marketing, production, and sale of marijuana.

Employers will also need to understand the legality of marijuana with the state. Recreational use is permitted, meaning the law allows consumers to use cannabis without issue. Gough touches upon this in the following statement:

“Once the Cannabis Control Board is in place, the Office will be officially formed and can begin promulgating regulations to implement the MRTA, including provisions outlining cannabis product requirements, ensuring industry access for small businesses and communities that have been disproportionately impacted by the war on drugs and opportunities for legacy operators and people with past cannabis convictions.”

However, experts believe it may take up to two years to finalize the regulations created by the Board.

NY Marijuana Regulation and Taxation Act (MRTA) Explained

Prohibiting marijuana in New York State has been ineffective, to say the least. Rather than ceasing marijuana use throughout the state, New Yorkers have continued to use marijuana despite its prohibition.

The illicit marijuana industry has thrived in New York under prohibition. But the hope is that with the MRTA, the state will have a profitable recreational cannabis space for New Yorkers who are 21 and older.

Over the years, the illegal nature of cannabis in New York State has hurt people. The growth of this illicit industry has resulted in disproportionately focused adverse impacts on communities of color, as well.

MRTA Mission

Through the MRTA, the goal is to address the negative impacts of the failed former policy. This act will create a responsible and well-regulated cannabis industry by encouraging licenses and legal dispensary operations.

The industry will generate millions of dollars in tax revenue that will not only strengthen the New York State economy, but support communities that have felt the most significant effects of marijuana prohibition.

MRTA Regulatory Implementations

The taxation act MRTA will implement legalizes the production, use, and distribution of marijuana.

While it’s not federal law, the bill takes cannabis plants and products out of the New York Controlled Substances Act and permits the regulation of marijuana with supervision from the Liquor Authority of New York State.

With this legislation, the distribution and use of cannabis and cannabis products will be regulated in a way that’s comparable to the way tobacco and alcohol are regulated.

Legislative Goals of MRTA Summarized

Here’s a list of what this legislation aims to achieve:

  • Establish the Office of Cannabis Management
  • Expand New York’s Existing Medical Program
  • Establish a Licensing System
  • Create a Social & Economic Equity Program that Encourages Individuals Disproportionately Impacted by Cannabis Enforcement to Participate in Industry
  • Tax Collection Projected to Reach or Exceed $350 Million Annually & Potentially Create 30,000 to 60,000 Jobs

Weed Is Legal in New York: What an Opportunity!

If you currently operate a cannabusiness in New York or are considering opening one now that legalization has happened, now is the time to focus. The opportunities are seemingly endless, and as the consumer base grows throughout the state, we can expect legalization to continue encouraging this market to expand.

Whether consumers are smoking cannabis for health purposes or recreationally, dispensaries can expect the formerly illegal drug to bring in the big bucks. Scaling these operations will become even easier once federal legalization passes.

But for now, dispensaries will have to focus on the local market. Scaling in conjunction with state laws is essential, and once the market becomes more mature, we can expect its health to expand.

Since adults no longer need to worry about penalties for using this drug, sales are increasing. And as sales increase, we can expect the health of this market to continue.

Scale Your New York Cannabusiness Now

The opportunities are here, and we’re ready to help. If you’re interested in scaling your New York marijuana business to obtain a larger share of the market, Northstar is here to lead the way!

Contact us now to find out how financial services will expand your operation’s success in this budding market. Our experts are here and ready to help!

We see you’re looking for more information about state laws on cannabis. Make sure to check out these other articles too:

New York Weed Laws in 2021

New York Marijuana Legalization: One of the Most Progressive Laws in America

New York’s Off-Duty Conduct Law: A Win for the Cannabis Industry

New Jersey Marijuana Laws: Big Changes Coming

Michigan Cannabis Law News: Rule & Regulatory Updates

All You Need to Know About Cannabis in Michigan in 2021 Continued

Michigan Cannabis Law & Legality in 2021

States That Could Legalize Cannabis in 2021

Virginia Marijuana Laws, Penalties, & Sales

New Jersey Cannabis News & Updates

New Jersey Cannabis News & Updates

The cannabis space in New Jersey is evolving each day. As more progress is made, the state’s cannabis industry is on track to level up its economy with various business opportunities.

But is the newly-created legal adult-use market worth investing in just yet?

Let’s just say, if you’re considering starting a cannabis business in the Garden State, now is the time to do it! And if you’re already operating as part of the state’s cannabis sector, it’s time to start scaling your adult use business!

This article serves to discuss New Jersey’s Cannabis Regulatory Commission, its medical and recreational marijuana businesses, and other updates on the state’s cannabis space.

Thinking about scaling your operation in NJ? Let Northstar lead the way!

Contact us now to learn how our financial services will grow your endeavor in this budding space!

New Jersey Cannabis Regulatory Commission

The NJ Cannabis Regulatory Commission, established in September 2018, is a newly created agency dedicated to ensuring that the state has a well-regulated marijuana industry. This Commission analyzes and implements updates and changes to the marijuana market.

At this point, we’re still waiting to learn how the Cannabis Regulatory Commission plans to regulate adult-use cannabis products through cannabis legalization. However, for now, it’s responsible for the medical marijuana program within the state, giving patients access to products including:

  • Cannabis flower
  • Cannabis extract
  • Infused oral lozenges
  • Cannabis topicals

Recently, there have been some announcements about how cannabis legalization will proceed in New Jersey. While the state has made it legal to use cannabis for medical and recreational purposes, legalization requires New Jersey to create and implement rules for the space.

Medical Marijuana in New Jersey

Medical marijuana in New Jersey is restricted to those with specific medical conditions. In fact, the list of qualifying conditions is extensive and includes:

  • Amyotrophic lateral sclerosis
  • Anxiety
  • Cancer
  • Chronic Pain
  • Dysmenorrhea
  • Glaucoma
  • Inflammatory bowel disease, including Crohn’s disease
  • Intractable skeletal spasticity
  • Migraine
  • Multiple sclerosis
  • Muscular dystrophy
  • Opioid Use Disorder
  • Positive status for Human Immunodeficiency Virus (HIV) and Acquired Deficiency Syndrome (AIDS)
  • Post-Traumatic Stress Disorder (PTSD)
  • Seizure disorder, including epilepsy
  • Terminal illness with a prognosis of fewer than 12 months to live
  • Tourette Syndrome

To qualify and become a registered patient with the state’s Medicinal Marijuana Program (MMP), a person must:

  • Have and maintain a bona fide relationship with a physician who has registered with the program. This relationship involves having a physician responsible for handling the assessment, care, and treatment of the patient’s debilitating condition.
  • Be a Jersey resident.
  • Be diagnosed with one of the qualifying medical conditions the New Jersey health care practitioner registered with the MMP has outlined.

Before adult-use marijuana legalization, the state’s medical marijuana operations were limited to serving patients. But with legalization, New Jersey marijuana laws now allow these operations to apply to begin serving weed to the local adult marijuana market.

New Jersey Marijuana for Recreational Use

New Jersey legalized adult-use marijuana. Now that the law is catching up to this progress, the regulations are in place, and sales will likely begin very soon.

Delivery operations will be allowed to support dispensary sales and other local endeavors. Besides delivery within all state municipalities, sales will be permitted in the state municipalities that allow them.

The law also allows cultivation. However, important to note is that municipalities will decide on how the law works within their jurisdiction.

Dispensary operations will not be allowed to open everywhere within the state. But many municipalities will allow them for the tax revenue benefits.

When Did Recreational Cannabis Become Legal in New Jersey?

Governor Phil Murphy signed the new marijuana law into effect on Monday, February 22, 2021. This made Jersey the 14th state to make marijuana legal, effectively creating the way for these adult use operations to become established.

While Murphy couldn’t outline the process the state would use to implement legalization, his team would begin working on the laws and regulations. It’s now August, and we’ve seen a lot of progress. But everyone is still waiting for the final word from Governor Murphy to begin legal sales.

It’s been years since Governor Murphy said these sales would happen. And now that we finally see the light at the end of the tunnel, it’s easy to see why consumers and cannabusiness operators are eager to ignite this industry.

The process has been a long and hard one. But now that Murphy has taken this massive step in the right direction, it’s only a matter of time until we see the state’s cannabusiness operators reap the rewards.

Cannabis Regulatory Updates

New Jersey Dispensaries Cannot Sell Certain Edibles

New Jersey’s dispensaries have been barred from selling edibles that resemble food. But what does this mean exactly?

For starters, the CRC rules highlight cookies and brownies by mention. So, we can expect that baked goods are out.

The CRC regulations state, “Ingestible forms … shall only include syrups, pills, tablets, capsules, and chewable forms.” This measure has already been approved by the panel.

CRC Executive Director Jeff Brown has stated that some gummies would be allowed under the new regulations. This includes the soft lozenges already available at the state’s medical marijuana dispensaries.

At this point, there is no timeline as to when additional regulations for food-related items for consumers will be issued. However, when the time comes, we can expect the CRC to issue waivers to manufacturers.

New Jersey Still Developing Standards for Workplace Marijuana Testing

The NJ Cannabis Regulatory Commission has made some rules. However, at this point, they have not addressed workplace marijuana testing standards.

The Commission released a 160-page Personal-Use Cannabis Rules that address the cannabis space. But this does not touch upon employer drug testing. This set of rules does temporarily waive CREAMMA’s “physical examination” demands until the Commission “develops standards for a Workplace Impairment Recognition Expert certification.”

For now, employers do not have to physically evaluate employees for drug testing purposes.

NJ CRC Pauses Physical Evaluation Requirement for Drug Testing

The latest alert from the NJ CRC involves new employment protections offered by CREAMMA for employees and job applicants who are legally allowed to use marijuana off-duty.

CREAMMA also preserved employers the right to drug test their workforce. However, there’s a new requirement: testing for suspected cannabis use must include a physical evaluation to check the employee’s level of impairment while performing job duties. This will have to be conducted by someone certified to gauge a person’s state of impairment.

These employment protections under CREAMMA have been enforceable since August 19, 2021. This was when the NJ CRC issued its first set of Personal Use Cannabis Rules. These rules are outlined below.

Commission Approves Specially Adopted Personal Use Cannabis Rules

On August 19, 2021, the Commission approved Specially Adopted Personal Use Cannabis Rules. These rules will remain in effect for at least one year.

Through these rules, New Jersey’s recreational cannabis industry has been established. The CRC can start licensing cannabis businesses while these rules promote social equity, safety, and accessible cannabis as it allows municipalities to remain in control of how cannabis businesses can operate in their jurisdiction.

Cannabis Business Licensing in New Jersey

These new rules allocate different license classes to each stage of the state’s cannabis supply chain. The classes include delivery services, distributors, retailers, manufacturers, and cultivators.

Furthermore, these rules establish a microbusiness license for each license class. This license is for cannabis businesses that do not have more than ten employees and operate at a facility that does not exceed 2,500 square feet.

Small business ownership in the state’s recreational marijuana industry will flourish as the Commission has not limited the number of microbusiness licenses available. Microbusiness license applications will receive priority over other cannabis business applications as the Commission continues the licensing process.

Microbusinesses will have to pay 50% of the license fee for their class. Through these rules, Alternative Treatment Centers licensed under the state’s medical cannabis law will be able to expand their operations to include recreational cannabis.

Furthermore, the Commission plans to limit how many cultivation licenses it will award over the two years from February 22, 2021 to 37. This includes expanded ATCs, but it does not include microbusiness cultivators. After the 24-month period, the Commission will decide if it will increase how many cultivators the state needs to meet the medical and recreational market demand.

New applicants can apply for a conditional license or an annual license. The conditional license applications will receive priority over annual license applications. For application purposes, business owners must show that they’ve made less than $200,000 the previous year or $400,000 if they’re filing jointly.

Application Fees

new jersey cannabis news information

Initial/Annual License Fees

new jersey cannabis news information

ATC Expansion Fees

new jersey cannabis news information

Municipal Authority

Municipalities receive considerable control over shaping the cannabis space within their jurisdiction. They can:

  • Opt out of the recreational cannabis program. With this rule, around half of all New Jersey towns have decided to refuse adult-use marijuana;
  • Limit the number of specific types of businesses operating within their jurisdiction;
  • Restrict cannabis businesses’ hours of operation and location. This includes using the law to ban legal cannabis businesses in school zones and setting restrictions regarding how far these operations must be away from playgrounds and places of worship;
  • Set local licensing requirements and civil penalties;
  • Limit the kinds of cultivation that are allowed within the municipality. One example is that some municipalities might use the bill to demand all cultivation occur indoors;
  • Place a 2% transfer tax on marijuana and marijuana products a business transfers within the jurisdiction; and
  • Communicate municipality preferences regarding licensure to the Commission.

Municipalities Cannot

  • Limit cannabis delivery within their jurisdiction; or
  • Limit cannabis transports routed through their jurisdiction.

Social Equity

Through the recreational legalization bill, social equity becomes the focus. The state regulations increase opportunities for people who have been significantly impacted by the War on Drugs by designating three types of priority licenses.

The marijuana bill incorporates industry licenses that aim to increase the following:

  1. Social equity businesses,
  2. Diversely-owned businesses, and
  3. Impact zone businesses.

Here’s a bit about each.

Social Equity Businesses

The regulations define a social equity business as follows. To qualify, the majority of the ownership interest must be held by someone who has resided in an economically disadvantaged region for five of the past ten years and whose household income is 80% or less of New Jersey’s average median household income. The second method is to have a person or persons who have been convicted of at least one marijuana-related offense.

Diversely-owned Businesses

A company is listed as “diversely-owned” if the majority of the ownership interest is held by people who are minorities, women, or disabled veterans. The term “diversely-owned business” also applies to businesses with minority, female, and disabled veteran management and operational control. These operations must be controlled by at least one of these types of owners to qualify as diverse.

Impact Zone Businesses

An impact zone is a municipality with a significant population that, as a result of previous criminal cannabis enterprises, contributes to higher levels of law enforcement activity, unemployment, and poverty. A business in an impact zone is controlled by someone who resides in an impact zone and has lived there for at least three consecutive years before the date of application.

Garden State Cannabis News Updates

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Considering scaling your operation in NJ? Let Northstar lead the way.

Contact us now to learn how our financial services will grow your endeavor in this budding space!

You seem interested in state cannabis legalization news. You might also like these articles:

New York Weed Laws in 2021

New York Marijuana Legalization: One of the Most Progressive Laws in America

New York’s Off-Duty Conduct Law: A Win for the Cannabis Industry

Michigan Cannabis Law News: Rule & Regulatory Updates

All You Need to Know About Cannabis in Michigan in 2021 Continued

Michigan Cannabis Law & Legality in 2021

States That Could Legalize Cannabis in 2021

Virginia Marijuana Laws, Penalties, & Sales

280e Tax Code Insight

280e Tax Code Insight

Section 280e is notorious in the cannabis industry. This tax code inhibits most cannabis businesses to report their profits and gain recognition from the IRS.  

Section 280e has been a roadblock for many operators in the industry. It has made it hard for these businesses to succeed. However, it’s certainly not impossible.

Despite cannabis’s status as a Schedule I Controlled Substance, it’s possible for cannabusiness owners to write some cannabis business costs off. The internal revenue code is a hindrance for cannabis entrepreneurs. But it’s possible to reveal deductible costs with the right insight.

In this article, we provide insight into Section 280e. We explain what it is, what cannabis businesses should expect, how to avoid an IRS audit, and more.

Looking for expert financial services to maximize your tax deductions? Northstar is here to guide you!

Contact us now for more information on how we help cannabusinesses relieve the tax burden of 280e.

section 280e impacts cannabis money

What is Section 280e?

Section 280e is an IRC that dictates how the cost of goods sold and other business expenses work for the cannabis industry. It serves as a legal basis for the IRS to tax dispensaries on their profits because they believe it’s a trade or business without ordinary income or loss.

What is the History of the 280e Tax Code?

The 280e tax code was created in 1982. It was a time of intense public debate over drug laws. The 1980s War On Drugs prompted the implementation of stricter laws for marijuana and other substances.

The Reagan Administration created Section 280e after a court case during which a convicted cocaine trafficker claimed he should be allowed to deduct ordinary business expenses under federal tax law. Then, in 1982, Congress implemented 280e to ensure other drug dealers from doing the same. Through this law, no deductions are allowed “in carrying on any trade or business if such trade or business consists of trafficking in controlled substances.”

This was before the legal cannabis industry existed; a time when drug smugglers and kingpins were earning millions of dollars through the black market drug trade daily. The federal government used the 280e Tax Code to ensure that an illicit operation involved in trafficking could not obtain tax deductions.

However, some members of Congress now believe the government has taken Section 280e too far. They feel that it has had an “adverse effect” on legitimate cannabis businesses. But the bill is still in place.

What is the Controlled Substances Act?

The Controlled Substances Act (CSA) is the law that paves the way for 280e. It’s one of the federal government’s most commonly used tools to criminalize cannabis.

Through the CSA, the federal government regulates the manufacture, possession, use, and distribution of certain drugs. This system considers cannabis in the same category as heroin and LSD.

The Act created five schedules to classify controlled substances based on their risk for abuse: Schedule I drugs are deemed highly addictive with no medical value; whereas Schedule V drugs have a low potential for addiction and accepted medical uses.

Cannabis, however, has been placed in the most restrictive category: Schedule I. This puts every legitimate cannabis business in violation of federal law. And with Section 280e in place, legitimate cannabis business owners have accounting difficulties that stem from what would normally be considered ordinary business expenses.

What Does Section 280e Do?

Section 280e prevents cannabis businesses from deducting business expenses when filing taxes. This includes cost of goods sold. In short, it taxes cannabusinesses on their gross profit.

This is different from a normal business. A normal business can deduct its operating costs and other expenses under section 162 of the internal revenue code (IRC). Although cannabis cannot be deducted, section 280e allows for some cost deductions. However, it’s not ideal for most businesses and comes with a risk of an IRS audit if the federal tax isn’t appropriately accounted for.

state legal cannabis dispensary 280e damages

Why Is 280e Harmful to State-Legal Cannabis Businesses?

One of the biggest reasons why marijuana businesses would rather not have 280e in place is because it taxes them at a higher rate than normal businesses. This makes it difficult for legitimate cannabis business owners to compete with unlawful operations and other industries in the marketplace.

There’s a relatively simple formula to determine federal income taxes. You begin with gross income, minus business expenses to determine taxable income, and then pay taxes on this money.

However, for a cannabis business, the operations must pay taxes on gross income. Generally speaking, this results in legitimate cannabis industry business operators paying tax rates of 70% or more. This is nearly double the amount the business actually earns in some cases.

How Does 280e Tax Code Apply to Cannabis?

Section 280e makes it harder for legitimate marijuana businesses to succeed. It prevents legal cannabis business owners from deducting expenses for producing, purchasing, or distributing their product.

In most cases, this results in a higher tax rate than the normal 25%. Because of this, some cannabis industry leaders have begun pursuing legislative solutions to change the code and allow deductions.

Tax Code 280e for a Legal Cannabis Business

Legal adult-use or medical marijuana operations are working with a controlled substance. At least, according to federal law. But just because cannabis companies work with cannabis does not mean they cannot avoid the tax court.

How to Avoid a 280e Tax Code Violation

Avoiding a tax code violation as a state legal operation means a cannabis company must stay in compliance with its state’s laws. Because federal law takes priority over state law, this means companies must determine whether a  violation exists in their respective states.

In many cases, cannabis operations are complying with the 280e tax code by splitting their marijuana companies in half. By operating two entities under one roof, some deductions are achievable.

Business One owns or rents the building. This involves handling the storage and transportation. It also offers employment benefits, hosts company events, and covers maintenance services. Non-cannabis products like t-shirts, keychains, and pipes can also be sold by this business.

The second related business handles cannabis directly. This can involve growing, curing, and packaging cannabis. It also should include minimal overhead-related expenses. The main expense that should be included in this operation should be the inventory itself.

Steps to Resolve 280e Tax Code Violations

To ensure your taxable year has as many deductible expenses as possible, your cannabusiness should avoid incorporating as an S-Corp or an LLC. This is because of the unique restrictions this code pushes on these U.S. operations.

Cannabusinesses in the U.S. should reduce their corporate tax liability and facilitate accounting by incorporating as a C-corporation. C-corp business operators get taxed on their salary and/or dividends. Since this is a different structure, you can reduce how your cannabusiness pays taxes. But you might only need to use this strategy for the second business if you use the split strategy.

How to Avoid Paying Taxes from Gross Income Under 280e

You cannot completely avoid paying taxes under this code. But a deduction or credit shall be possible if you know how to calculate goods sold COGS (Cost of Goods Sold).

Cost of Goods Sold

What is Cost of Goods Sold?

Cost of goods sold is a business expense that applies to most retailers. It’s an important accounting measure for companies like Canna Care Docs. COGS helps cannabis businesses keep track of how much they pay for individual products and materials.

COGS allows business operators to handle the indirect costs of doing business while bypassing some of these tax limitations.

Which Expenses Are Deductible Under 280e the Tax Code?

COGS are deductible under this code. But this varies throughout the marijuana industry.

Expenses directly related to your operations can be deducted. For instance, as a cannabis cultivator, raw materials and supplies are directly related to your operations.

But inventory costs should also be considered for cannabis entrepreneurs.

You can deduct COGS. But this is limited to the cost of the product and the costs related to obtaining your merchandise. You can deduct electric bills for inventory areas, too.

However, everything else is subject to this code’s limitations. You cannot deduct employee salaries, advertising costs, rental fees, etc.

Financial Services to Handle IRC 280e Issues

We recommend getting professional assistance. The right financial services have the potential to save some marijuana operations thousands, hundreds of thousands, and, yes, even millions of dollars.

Appropriately handling taxes and documenting everything gives marijuana operations the ability to scale successfully. But, most of the time, it’s easy for cannabusiness owners to push their obligations to the back of their minds until the season comes along.

This is why we recommend using our fractional CFO services. These services are especially beneficial to operations that don’t need a full-time CFO in-house and would prefer the flexibility we offer.

Looking for expert financial services to ensure your net income gets the best effective tax rate possible? Northstar is here to guide you!

Contact us now for financial services that will scale your marijuana business and guarantee your success in case of a tax audit.

You seem interested in tax insight. You might also like this article:

Dispensary Tax Deductions Guide

Cannabis Financing Ideas to Scale

Cannabis Financing Ideas to Scale

Whether you’ve recently decided to start a cannabis business or have been in the industry for years, raising capital can be one of the most challenging aspects of the entrepreneurial experience. However, it’s particularly difficult to finance cannabis businesses because the industry is still gaining its footing.

But why?

The cannabis industry is still very young, and there are ways that entrepreneurs are getting creative with financing ventures. In this article, we explain how you can use cannabis financing effectively, cannabis business lenders and investors, loan types, and more.

Looking for expert assistance managing your cannabis business’s financials? Northstar is here to guide your success!

Contact us now for the help you need to ensure consistent cash flow and successful scaling.

cannabis financing flower notes

How to Use Cannabis Financing

Cannabis financing is just now taking off in this young industry. Funding is essential for development, and for those who don’t have deep pockets, finding a source of cannabis business funding is crucial for success.

But acquiring a cannabis business loan is only part of the complexities surrounding this topic.

Cannabis business owners that obtain a cannabis business loan need to have a plan to become profitable. Or, if the operation is already turning a profit, how to increase those profits to ensure any cannabis loans can be paid back while scaling those profits.

Have you considered how to effectively utilize your cannabis business loan to ensure success? Here are some ideas marijuana businesses can utilize:

cannabis facility construction

Facility Construction

Whether cannabis businesses focus on recreational marijuana, medical marijuana, or operate as one of the many ancillary cannabis companies, facility construction can play a role in operational success.

Cannabis business owners are unlikely to find a facility that’s completely ready to operate. While the facility might come close to perfection, some investment will be essential to ensure it’s ready to operate – unless it’s an M&A for an established operation, of course.

However, if you’ve already found your property and need to build a facility, this will cost money. Your facility will need to meet the needs of your cannabis business, and allocating some – or even all – of your business loan may be essential to ensure your business can begin operating.

hiring more staff with cannabis financing

To Hire More Staff

Solopreneurs aren’t common in cannabis. Most of the time, financial institutions willing to offer a small business loan to cannabis business operators will want to learn more about your team before offering to finance your cannabis business.

However, even with a winning team in your corner, hiring more staff can facilitate multiple areas of growth for your business. With this in mind, it may make sense to obtain a loan and use some of the proceeds to hire staff – particularly, technical staff if it’s not an area you’re familiar with yourself.

social media marketing using cannabis loan

Marketing & Advertising

Cannabis business loans are also allocatable towards marketing and advertising cannabis businesses.

Even if you have a marketing budget, think about how your business will spend its dollars wisely – and whether it’s necessary to pay for all of that marketing or if attracting more customers can be done with less investment out of your business’ budget.

This can also apply to any ancillary cannabis-related businesses. Pushing business financing towards marketing and advertising has the potential to give a cannabis business the fuel it needs to succeed, and if it results in an excellent ROI, it becomes easy to justify the expense.

improving cash flow with a cannabis business loan

Manage Cannabis Business Cash Flow

Business cash flow is a concern for any business owner. But for cannabis business funding, it becomes even more essential to consider.

Cash flow is the money that comes in and out of a business on a regular basis. For businesses operating in this space, this can be especially useful when it comes to paying for inventory – and if you have trouble funding your business with your current revenue, managing your business cash flow may become even more important than making strategic investments to grow your cannabis business.

open a new location ribbon cutting ceremony

Open a New Location

Your cannabis business might be doing increasingly well with each passing month. But at some point, there’s a chance you’ll want to open a new location.

This is where business loans can remove some of the wait time for business owners in the process of scaling their cannabis companies.

Rather than saving money to expand marijuana businesses, savvy ganjapreneurs obtain business loans to finance their new location. This has the potential to increase revenue significantly while the cannabis business pays back the business loan over time.

equipment leasing cannabis industry

Equipment Financing and Leasing

Equipment financing has become commonplace in the cannabis industry. Rather than investing thousands of dollars to obtain the necessary equipment to conduct business, these financing solutions allow business owners to pay for the tools they need over months or even years.

For example, a cultivation operation lacking cannabis business funding can use equipment financing to pay for the cannabis grow lights, cultivation equipment, and irrigation systems they might need to start their business.

Equipment leasing works similarly. Rather than purchasing equipment outright, many businesses go with an equipment leasing option to obtain the necessary tools and machinery they need to get started.

hiring lawyers, accountants, and other professionals specializing in cannabis

Lawyers, Accountants & Other Professionals

Hiring a lawyer or someone to handle cannabis accounting can be essential for any cannabis business – especially if it’s your first time operating in this industry. However, engaging the services of a professional doesn’t always come cheap.

While a lawyer or CPA can help you avoid cannabis compliance-related legal trouble, they also charge fees for their time. If your cannabis business is just getting started, it might make sense to obtain business loans and use the funds to hire professionals who can assist in areas that aren’t up to par with industry standards.

Software & Security Systems

Compliance is crucial in the cannabis industry, and many states require cannabis businesses to use specific software and security systems, especially if they’re a hands-on operation. For example, METRC is essential if your business operates in one of the legal cannabis states that use it.

Using cannabis business loans for software and security systems can be ideal if you don’t have cash on hand. It’s also important to consider long-term planning and how using a business loan for this type of investment can result in savings over time.

cannabis business loan

Cannabis Business Loans

Where to get Cannabis Business Loans

Cannabis businesses might find it challenging to get small business loans. However, options for business loans exist. While cannabis business funding might take some creativity, business owners can acquire the capital they need to scale their operations in the cannabis industry.

The federal government has made it increasingly difficult for cannabis industry participants to obtain loans, whether for medical marijuana operations or business owners handling recreational cannabis.

Here’s are some of the most common sources for cannabis business loans:

Financing Company

Cannabis business financing options are available to this elevated space. But cannabis business financing solutions are still quite limited.

Business owners can check with several traditional lenders to see if that will work. But a financing company willing to offer cannabis business loans is usually one of the best methods for business funding.

Diamond Business Loans is one financing company operating out of California. This business helps cannabis startups and established operations find business funding through three main programs. The company offers an unsecured capital program, an equipment program, and a commercial real estate purchase program.

Other financing companies offer cannabis business loans, too. Some of these include Dynamic Alternative Finance, GoKapital, Small Business Funding, and United Capital Source.

Venture Capital Firms

Venture capital firms are becoming increasingly common in cannabis. This sort of funding is a good option for small business owners operating in the marijuana industry who would prefer to avoid taking on debt.

Equally important to understand is that a marijuana industry business owner that accepts funding from a venture capital firm is diluting his or her ownership percentage of the business. Thus, if your business is already earning money, it could be best to look for revenue-based business loans instead.

Most small business owners in the marijuana industry look at many grow facilities lenders and alternative lenders before choosing from the VC firms that are willing to work with a cannabis company. However, for those looking into these funding options, Casa Verde, Tuatara Capital, L.P., and Privateer Holdings are the VC firms that invest in the most cannabis and hemp businesses

Cannabis Business Loan Types

Small Business Loans

Small business loans are offered by banks and other traditional lenders to small businesses that need capital but operate outside of the cannabis industry. While funding options for this space are limited at many of the financial institutions regulated by the federal government, a cannabis business owner might still be able to find a small business loan.

Business owners seeking financing through banks or credit unions might obtain a loan based on their company’s revenue, cannabis equipment, assets, or personal guarantee.

The good news is that there’s increasing interest in offering cannabis loan options to small businesses. Meanwhile, some banks are starting to look at these companies as potential clients and offer cannabis business loans.

Business Cash Advance Loans

Some financial service providers may offer a merchant cash advance. However, this is usually one of the most expensive forms of alternative financing, and small business owners are usually better off steering clear of these cash advance options.

Cash advances are only recommended in extreme situations when no other options are available. It’s quite easy for a marijuana business to get behind when they choose to take a cash advance, and it’s important to remember that a business cash advance should be considered as a last resort.

Real Estate Loans

Commercial real estate leasing isn’t always an option for cannabis. Federal government restrictions on these operations make it less appealing to rent the property out.

This is where real estate loans can offer a cannabis business owner the option to buy real estate.

A real estate loan involves a formal loan agreement that helps a business owner purchase property and pay back the loan over time with interest. The loan proceeds to get paid off, and most business owners have a plan in place to ensure they have the capital to make the payments through their day-to-day operations.

Cannabis Working Capital Loans

Another type of cannabis loan is the working capital loan. These types of loans offer financing options for daily operations and are often an attractive option because they don’t require collateral, although the lending institution will review your cash flow and personal credit score to determine whether or not you qualify for a loan.

If your cannabusiness requires more funding than is offered by other commercial real estate financing options, it may be time to look into a working capital loan.

Cannabis Acquisition Loans

Cannabis acquisition loans are available in the cannabis industry, and some of these financing options can help a business owner purchase real estate or other assets.

These loans offer less debt than what’s found with typical acquisition loans, making them more attractive to those who are interested in large-scale operations. Cannabis acquisition loans are secured against property owned by business operators; therefore, this type of financing is only available when a business operator owns real estate.

Bridge Loans

Bridge loans can help a business owner acquire more funding when they need it most.

These loans provide the financial support that’s needed to purchase more inventory or property without having to pay for anything upfront.

Once a loan has been approved, business operators can keep their day-to-day costs low until capital raises have been made and other financing options have been considered.

Bank Loan

A bank loan is another type of financing that’s available to marijuana businesses. But these loans have the fewest options as compared to other types of cannabis loan products.

A bank loan is also one of the most difficult forms of financing for a cannabusiness owner to obtain because banks are usually resistant to offering these products unless they’ve already received approval from their federal government regulator. Regardless of business credit or your credit score, most businesses in this space will have difficulty getting a bank loan because of federal regulations.

Private Loans

Private loans are a popular funding option for cannabusiness owners.

These loans are usually offered by family members or friends who wish to offer financial support without any strings attached. The simple nature of these loans can help business operators secure the funding they need within days and keep their day-to-day costs low until revenue has been raised.

Term Loans

Term loans are often used in the cannabis industry because they offer a fixed, predictable source of financing.

These loans are secured by an underlying asset, and interest rates can be adjusted over time. This offers business operators another way to secure funding for a positive cash flow situation with little risk involved.

SBA Loans

SBA loans are one of the most popular financing options for new businesses in the cannabis industry.

The Small Business Administration (SBA) offers funding to cannabusiness owners who are interested in starting a business from scratch or purchasing real estate that would otherwise not be available to them with traditional lenders. The SBA has numerous guidelines and restrictions surrounding their loans, but if approved, these loans can help business operators secure enough capital to open doors and get started.

cannabis and money

Cannabis Business Financing Solutions

Financing exists in this elevated space. Here are a few we recommend exploring if you aren’t already:

Invoice Financing

Invoice financing is a form of financing that helps cannabusinesses generate enough capital to pay their employees, taxes, and other business expenses.

Invoice financing is also beneficial for those who need help generating revenue because it allows them to purchase inventory upfront using an invoice rather than waiting for customers to pay.

While some companies might base their invoice financing options on a cannabusiness owner’s credit score, business credit usually works for the purpose of invoice financing.

Equity Financing

Equity financing for cannabis businesses is also a popular option. The majority of businesses in this space aren’t eligible for traditional financing products because the legal regulations surrounding cannabis are so new.

Equity financing allows business operators to access funds from investors without paying any fees upfront. This form of financing is often provided to cannabusiness owners who already have a positive cash flow and need capital to help them scale their operations and bypass traditional lending guidelines.

Personal Credit

If you have a high credit score, besides being eligible for cash advances, you likely have good personal credit. This form of credit can also be used as business credit.

Your business credit the same as your credit score and can be used for financing purposes such as investing in a cannabis company or borrowing money to purchase cannabis equipment.

Cannabis Lenders

The SAFE Banking Act has lessened the restrictions for cannabis lenders at the federal level. While many lenders still refuse to see those working with cannabis value as a potential customer, the fact that restrictions have eased at the federal level is enough for some lenders to allow cannacompanies to open a bank account and use these services.

Lenders may offer solutions to allow cannabusiness operators to purchase new or used equipment, property, and other expenses. But it’s important to remember that not all lenders are willing to provide loans to cannacompanies.

Alternative Lenders/Investors

Alternate lenders and investors are equally important to consider. Here are some of the options available for cannabis:

  • Family Offices
  • Cannabis specific funds and a few hedge funds
  • Angel investors
  • High net worth individuals
  • Musicians, athletes, and other celebrities
  • Business incubators and accelerators
  • Industry-specific holding companies

Crowdfunding

Recently, people have been using crowdfunding to start new businesses. There are many crowdfunding platforms available.

For example, some of the platforms cannabusinesses can use are Indiegogo and Kickstarter. Indiegogo has approved some cannabis companies for raising money through their platform.

Other known platforms include StartEngine, which has also approved funding requests for cannabis startups. Lastly, SeedInvest is a platform that welcomes cannabis companies to participate.

cannabis and money cannabis financing

Concluding on Cannabis Financing

Whether you need to purchase property, don’t have working capital, are looking for a way to get the equipment you need, or something else, financing options are available. Hopefully, you’ve found the financing solution your cannabusiness needs in this article.

While the credit unions are beginning to support cannabusinesses, raising capital can be challenging for these operations. The space is still young, and as it matures, we expect to see more financial institutions offering support to elevated businesses.

Northstar: Guiding Cannabis Industry Success

Looking for expert financial guidance in the cannabis space? Northstar is here to guide you!

Contact us now for the financial services your operation needs to scale its success!

Is Marijuana Legal in New Jersey?

Is Marijuana Legal in New Jersey?

Whether you’re a consumer interested in recreational or medical marijuana or an entrepreneur looking to get involved, you’re likely wondering if marijuana is legal in New Jersey.

Yes! New Jersey recently legalized recreational marijuana, and medical marijuana has been legal for quite some time.

For those looking for a simple answer – yes, marijuana is legal in New Jersey. But this hasn’t been the quick and easy win consumers and ganjapreneurs wanted.

What Happened?

There was a failed bid to legalize marijuana for recreational purposes in the state legislature. After this failure, a statewide ballot question received overwhelming approval from voters. But then, we observed disputes regarding how to implement a new system.

Governor Phil Murphy signed three new laws for marijuana legalization in the Garden State. Not long after, New Jersey’s CREAMMA was issued to outline the state’s regulations. But New Jersey’s marijuana laws are still in their infancy.

New Jersey residents and business owners alike are waiting for these marijuana laws. Once this new system is implemented, consumers will be able to legally purchase marijuana from legal cannabis businesses operating within the state.

But for now, we need to understand all sides of the legal marketplace, policing, and expungement as the state has passed reform bills that focus on social, racial, and economic justice.

Thinking about starting or scaling a cannabis business in New Jersey? Northstar is here to lead the way!

Our experts are here to support your goals and thrive in New Jersey’s medical and adult use cannabis space. Contact us now to learn how we’ll guide your operation’s success!

medical marijuana program new jersey

New Jersey’s Medical Marijuana Program

Legal marijuana is nothing new for New Jersey. Despite recent recreational marijuana legalization, New Jersey’s Medical Marijuana Program has been operating for nearly a decade now. But this didn’t happen without some complications.

The New Jersey Compassionate Use Medical Marijuana Act (CUMMA) was passed in January 2010. Governor Jon Corzine signed it into law on January 18, 2010. However, the law was put on pause after Governor Chris Christie came into office the following day.

It wasn’t until August 9, 2012, that New Jersey’s medical marijuana patient registry reopened. This allowed registered physicians to finally begin offering patient certifications with the state’s Medical Marijuana Program.

Governor Christie then signed S 2842 into law on September 10, 2013. This allows cannabis in edible forms for registered patients younger than 18 to consume.

More Medical Marijuana Progress in NJ

Years went by, and on June 2, 2019, Governor Phil Murphy signed A 20. This law, also known as Jake’s Law – named after Jake Honig, a pediatric patient who had been using medical cannabis as part of his cannabis treatment. Through this bill, New Jersey medical marijuana laws now include provisions for home delivery, increased cannabis amount allowances, and expanded access with more cultivators, manufacturers, and retailers.

legalized cannabis plants in new jersey

Newly Legalized Cannabis in The Garden State

While medical marijuana dispensaries have had their time to shine in New Jersey, recreational marijuana possession is now legal. The state legalized recreational marijuana, which allows consumers to purchase, possess, and consume marijuana – all without worrying about having a good criminal defense attorney on hand!

The Marijuana Legalization Amendment

The Marijuana Legalization Amendment was approved on November 3, 2020. The amendment allows residents 21 years and older to legally possess and consume the plant for recreational purposes.

Besides marijuana possession and consumption, these indefensible marijuana laws impose a New Jersey state sales tax rate of 6.625% on all purchases of adult use cannabis. It also allows local municipalities to impose an additional 2% tax on legal weed (recreational cannabis).

New Jersey patients will still be able to buy legal weed without worry about contributing to the state’s sales tax revenue. This ensures all patients, including but not limited to terminally ill patients, can consume medical marijuana in New Jersey without inflated costs.

After a few months of determining the details, politicians working on the details of marijuana in New Jersey came to some decisions. On February 22, 2021, Governor Phil Murphy signed into law the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act.

Up to Six Ounces

Through these laws, up to 6 ounces of cannabis flower became legal to possess. Those who consume cannabis hash are allowed to possess up to 17 grams at a time, as well.

The bills signed will also implement a framework New Jersey voters will appreciate. These regulations will encourage the success of cannabis in New Jersey by creating an inclusive marijuana marketplace.

Furthermore, Governor Murphy signed A1897. This bill reduces penalties for possession of up to 6 ounces of cannabis and 170 grams of hash. Minors on their first offense will now receive a written warning instead of facing criminal charges over marijuana products.

Now that marijuana is legal in New Jersey, these written warnings will ensure that Jersey’s broken system no longer ruins the lives of young people. Rather than being charged with a fourth degree crime over a minor offense, minors will receive warnings to discourage underage marijuana use without damaging youths’ futures.

New Jersey’s Social Justice Aspect

Cannabis legalization in New Jersey is a monumental win for marijuana decriminalization activists. Law enforcement and its police officers had been disproportionately targeting members of black and brown communities.

Eventually, the criminal penalties will be expunged. But because of the damage done by prohibited cannabis in New Jersey, the social justice aspect of recreational sales is a major component of the new law.

The bill signed into law also includes helping communities most impacted by the War on Drugs. This ensures that business licenses will go to those in minority-owned and women-owned businesses first.

The black and brown individuals trying to rebuild their lives after being convicted of marijuana possession or distribution charges under prohibition have now been given an opportunity to succeed in the new recreational cannabis marketplace.

The Jersey Cannabis Industry

As for businesses, the industry’s anticipated millions of dollars in medical marijuana sales will quickly become millions of dollars in recreational weed sales. With these estimates (and tax revenue), we can only hope that the New Jersey legislature and governors continue to build a functional and cohesive marijuana market that will keep cannabis alive.

Medical cannabis will still thrive in New Jersey. But with the constitutional amendment enabling legislation that focuses on improving the state’s recreational sector, we expect positive change to continue in the Garden State.

marijuana dispensary nj

How Legal Cannabis Will Impact Residents

Cannabis consumers can still buy medical marijuana from Alternative Treatment Centers throughout the state. However, they will still need to get a physician’s recommendation.

For medical marijuana patients, there’s a 4 percent sales tax on marijuana products. But this tax is set to be removed by July 2022.

Patients and caregivers are still allowed to buy up to 3 ounces of medical cannabis each month. For terminally ill patients and patients under hospice care, there is no monthly limit.

We’re still waiting to hear what the Cannabis Regulatory Commission says about adult-use cannabis products. But for now, the Cannabis Regulatory Commission oversees the state’s medical marijuana program and allows the following products for patients:

  • Cannabis flower
  • Cannabis Extract
  • Infused oral lozenges
  • Cannabis topicals

new jersey legalized cannabis opportunities

Legalized Cannabis Opportunities in NJ

For business operators in New Jersey, the market share is growing exponentially. As more adults and medical marijuana patients decide to delve into the legal market, the opportunities for business owners continue to expand.

While New Jersey consumers can consume cannabis on private property (in their homes), dispensaries are allowed to have consumption areas for patients. Medical marijuana smoking is actually regulated the same way as tobacco smoking.

How do you open a medical marijuana dispensary in New Jersey?

You can’t, at least not at this point. The program started in 2010 and offered vertically integrated Alternative Treatment Center licenses. These licenses permitted cultivation, processing, and dispensing of medical cannabis to qualified patients. So far, the state has given six licenses in 2011 and six more in 2018.

In May of 2019, the state permitted ATC licenses for specialty endorsements. These include cultivation, processing, and dispensing. The vertically integrated permits had 1 cultivation endorsement, 1 for manufacturing, and one for dispensing. The state issued up to 15 dispensary endorsements, 4 vertically integrated permits, and 5 cultivation endorsements.

The NJDOH isn’t accepting applications for new Alternative Treatment Centers at this point. But other opportunities exist!

Cultivation Endorsements in NJ

With this endorsement, an ATC licensee can possess, cultivate, and package cannabis. They can also distribute or sell cannabis to other ATC endorsement holders. However, they cannot sell product directly to registered patients.

Cultivation endorsements are tiered by canopy size. These tiers allow small, medium, and large cultivators to operate.

  • 20,001 square feet to 30,000 square feet can have up to 2 cultivation endorsements
  • 5,000 square feet to 20,000 square feet can have up to 2 cultivation endorsements
  • Operations up to 5,000 square feet can have up to 1 cultivation endorsement

Manufacturing Endorsements in New Jersey

ATC license holders that obtain a manufacturing endorsement can possess and process cannabis. They can also buy, manufacture, and conduct research on cannabis from other ATC license holders. However, they cannot sell directly to consumers.

Dispensary Endorsements in NJ

Dispensary endorsements let ATC license holders buy marijuana from other ATC license holders. These operations can also supply and sell cannabis to registered patients.

Vertically Integrated Permit Holder in NJ

The vertically integrated permit holder can get a cultivation endorsement, manufacturing endorsement, and dispensary endorsement. Thus, those who hold this permit can operate as a vertically integrated cannabis operation in the Garden State.

New Jersey Recreational Marijuana Business Licensing

At this point, we still do not know how many recreational marijuana business licenses will be available in New Jersey. Despite the fact that the amendment does mention marijuana businesses, the state has not released the specifics just yet.

The Cannabis Regulatory Committee will have to establish and oversee the rules and regulations for the state’s recreational program. This regulatory agency will decide on what limitations and details will be involved in recreational marijuana business licensing.

Cannabis Cultivator Licensing

Any person or business that’s licensed to cultivate cannabis in New Jersey is allowed to sell or transport this cannabis to other cultivators, cannabis manufacturers, cannabis retailers, or cannabis wholesalers. However, cultivators are not allowed to sell or transport cannabis to consumers.

This individual or entity must hold a Class 1 Cannabis Cultivator License, and the state limits its license distribution to 37 cultivation licenses for the first 24 months.

Cannabis Delivery Service Licensing

Cannabis delivery service licensing gives a person or entity the ability to provide delivery services for consumer cannabis purchases and related supplies. This involves fulfilling orders for a cannabis retailer, allowing these operations to deliver cannabis items directly to consumers.

The person or entity operating as a cannabis delivery service in New Jersey must hold a Class 6 Cannabis Delivery License.

Cannabis Distributor Licensing

Cannabis distributor licensing in New Jersey is for any person or business that’s responsible for transporting cannabis in bulk from one licensed cannabis cultivator to another. Or, this can involve bulk cannabis transports from any one licensed cannabusiness to another licensed cannabusiness.

A license holder is also allowed to temporarily store cannabis or cannabis items if it has to do with transportation activities. The person or entity must hold a Class 4 Cannabis Distributor License.

Cannabis Manufacturer Licensing

Licensed cannabis manufacturers can process cannabis items by buying or otherwise getting usable cannabis, manufacturing, preparing, and packaging cannabis items. These manufacturers can also package, sell, and transport these cannabis-related items to cannabis retailers, wholesalers, and other manufacturers. They cannot operate with consumers directly.

Cannabis manufacturers in New Jersey must hold a Class 2 Cannabis Manufacturer License.

Cannabis Processing Licensing

Cannabis processors work directly with cannabis items in New Jersey. This involves buying or otherwise receiving cannabis, preparing, manufacturing, and packaging cannabis items, as well as selling and potentially transporting the products. However, this cannot involve direct contact with consumers.

Cannabis processors in NJ must hold a Class 2 Cannabis Processor license. This entity can also be thought of as a cannabis product manufacturing facility.

Cannabis Retailer Licensing

The cannabis comes from cultivators, and the cannabis products come from manufacturers or cannabis wholesalers. This business sells or distributes these products to consumers from a retail operation.

Retailers can use cannabis delivery services or a certified off-site deliverer to get products and supplies to consumers. Cannabis retail operations must hold a Class 5 Cannabis Retailer license.

Cannabis Wholesaler Licensing

Cannabis wholesalers buy, store, sell, transfer, and potentially transport cannabis products for the purpose of reselling them. These entities do not sell directly to consumers, and they must have a Class 3 Cannabis Wholesaler license.

cannabis leaf saying new jersey

New Jersey Cannabis is Legal

Medical and recreational marijuana are both legal in New Jersey. So, if you’re looking for a budding marketplace to conduct business, this is the state to start!

Looking to start or scale a cannabusiness in New Jersey? Northstar is ready to guide your success!

Contact us now to speak with one of our experts about how our financial services will enhance your operation in this budding space!

It seems like you’re interested in state laws covering cannabis. Make sure to check out these posts, too!

New York Weed Laws in 2021

New York Marijuana Legalization: One of the Most Progressive Laws in America

New York’s Off-Duty Conduct Law: A Win for the Cannabis Industry

New Jersey Marijuana Laws: Big Changes Coming

Michigan Cannabis Law News: Rule & Regulatory Updates

All You Need to Know About Cannabis in Michigan in 2021 Continued

Michigan Cannabis Law & Legality in 2021

States That Could Legalize Cannabis in 2021

Virginia Marijuana Laws, Penalties, & Sales

Starting a Nursery for Cannabis

Starting a Nursery for Cannabis

You’ve heard about the countless successful nurseries popping up all throughout the U.S. But having your own plant nursery changes when you choose to focus on cannabis instead of fruit trees, and tree seedlings.

You likely won’t find cannabis clones at garden centers any time soon – and for several reasons. Over the past few years, some growers have made the switch from growing trees and crafting potting soil to cultivating smaller plants; namely, cannabis.

Each successful plant nursery is selling plants to retail garden centers and acts as a wholesaler. But these sales come from potted trees, like Japanese Maples and other big plants that many nurseries grow.

While some small growers still want to propagate trees and create potting mixes from cow manure, many are making the switch to cannabis. But starting from the cannabis seed, everything is different.

In this article, we cover what goes into starting a nursery for cannabis, the regulations these businesses must adhere to, and how growing cannabis can be more profitable than selling a thousand trees annually.

Wholesale nurseries make more money with the right financial services! Step by step, Northstar will transform your plant nursery into a successful nursery.

Contact us now to learn how our experts will help you scale your part-time operation into a full-time business.

cannabis nursery

Cannabis Nurseries Are Different

The small business operations you buy your seed, the way you distribute, and the methods used to save money are all unique to this industry. Even the growing season is different – unless you grow indoors, of course.

Other nurseries can go to garden shows to obtain industry insight. But for a business responsible for growing plants that are still prohibited under federal law, they’re dealing with high value plants that must be grown in accordance with state regulations.

A simple Google search for softwood cuttings will reveal hundreds of nurseries that specialize in these cuttings. However, searching for cannabis seed, clones, soil, and other industry-specific products will solely reveal businesses that have focused their marketing on search engine optimization.

Since cannabis is still federally illegal, “free advertising” is essential. Pay-per-click options aren’t available just yet. However, despite the lack of paid advertising available, SEO can be quite costly.

Regardless of such, it’s important to know that this isn’t the only way cannabis nurseries can advertise. Despite these being tough times for cannabis nurseries to go into business, some websites and publications will allow marketing for nurseries. But these are niche-specific publications as opposed to the more mainstream advertising options.

As you can see, these operations aren’t all about their cuttings and plants; there’s more to this unique industry than meets the eye. But let’s cover more of the considerations you’ll face choosing to grow cannabis instead of trees and other more common plants from seeds.

cannabis nursery

The Start of a Cannabis Plant Nursery Business

Before starting a business specializing in cannabis seed and clone production, you’ll need a nursery business plan. This is especially the case if you plan to bring in investors.

cannabis nursery business plan

Planning Your Cannabis Plant Nursery

Your plan and pitch deck should showcase your plant nursery goals, and at the same time, it should offer your strategies. Give an analysis of the market, organizational structure, financial information, and operating plan on your own schedule.

Introduction

Your plan should offer an introduction for your plant nursery. This is where you’ll include an Executive summary and an overview of the market.

Your market overview should provide insight into the market, your target market, how you plan to price your products, and SWOT analysis.

Marketing Strategy

Your marketing strategy should offer insight into the sales forecast. This will include online advertising obstacle outlines, a marketing plan, competition analyses, target customer outline, and sales forecast.

Operational Overview

The operating plan should offer insight into the operations of your plant nursery. You’ll include what you plan to offer, how you plan to offer it, where you plan to grow, product assumptions, a physical security plan, transportation outline, and tracking solution. This is minimal information, and more information is always better.

Considering the products you plan to provide is essential in your plan. Whether you plan to offer clones, seeds, mature or young plants, flower, or something else, you’ll need to list out everything you plan to do as you’re selling all your plants.

Organizational Structure

Think about how your plant nursery should be structured. You’re not running a simple backyard nursery here; you’re starting a nursery for selling plants that are prohibited by the federal government.

You’ll need to determine how you’ll abide by regulations within your organization. This will include security and traceability, as well as training employees to adhere to compliance standards.

You’ll also need to consider cannabis waste removal. How will you remove waste products from the premises in accordance with local regulations?

How many plants can you grow? And how will you transport for retail, package, and process your products?

Consider every aspect of your plant nursery and describe the operations planning and production process. This should include soil, equipment, fertilizers, and other products used in the operation, as well.

Financial Plan

Your financial plan should outline a funding analysis. Where will you get the money for starting a nursery and maintaining its operations?

Your goal here is to provide a breakdown of your expected direct and operating expenses, as well as a forecast for your profits and losses. If you have cash flow, you should also include this statement, along with the main ratios and a balance sheet.

cannabis nursery

Cannabis Nursery Business Financials

Before you begin propagating plants and creating your secret own potting mixes, you likely want to know more about the financials. What should you expect as you cultivate healthy plants?

cannabis nursery profits

The Potential Profits

The profits can be pretty impressive.

Similar to retail nurseries, your business might want to produce clones. One plant is capable of generating many clones. This is why it’s crucial to choose plants wisely.

Your healthy mother cannabis plants should be able to produce between 15 and 30 healthy cannabis clones monthly. However, equally important to note is that this can vary depending on the plants’ health and capabilities.

An operation that’s around 1,000 square feet could hold between 20 and 40 mother plants. If your mother plants produce 15 to 30 healthy cannabis clones monthly, you’re looking at between 300 and 1,200 clones produced each month. You might even be able to get more clones out of a nursery this size.

Small growers commonly sell clones for between $3 and $15 apiece. Thus, on the conservative side of this small business, you’re looking at around $900 to $18,000 worth of clones produced monthly.

The price will vary with several factors, including whether your buyer is purchasing clones in large quantities, the frequency at which you’re selling to the buyer, the demand for your genetics, and more. But if you’re operating as a reputable cannabis grower in California or elsewhere, you should find it easy to sell your clones.

If you’re creating your own genetics, some small growers might even be interested in purchasing a seed (or several hundred) for a personal garden or commercial grow operation.

cannabis nursery expenses burning

The Potential Expenses

Profits cannot come without expenses. And if you grow your plants from a seed and sell off the cuttings, it’s important to consider all expenses involved.

Your costs will vary, of course. Some areas are more expensive to own or lease property than others. Then you need to consider your cannabis grow licenses, utilities, marketing, labor, soil and other plant costs, pots, and more.

Cannabis taxes also vary from state to state. For example, if you’re a small grower in California, you’re likely to spend more than a home based nursery in Colorado.

cannabis unique taxes

Cannabis-Unique Taxes

Taxes on cannabis plants are important to think about. Cannabis nurseries must tread lightly and abide by all cannabis cultivation, excise, and sales taxes in place. Immature seeds, mature plants, and clones all have unique tax liabilities to consider.

For instance, in California, the following is how you’ll handle taxation:

  • Cultivation tax: Cultivation taxes don’t apply to nurseries that sell immature plants, clones, and seeds.
  • Excise tax: Immature plants, seeds, and clone sales can be sold to other cannabis licensees. But distributors have to transport cannabis from your business to the other licensees. If you’re selling immature plants, clones, and seeds to a retailer, the distributor will need to collect a 15% cannabis excise tax from the retailer.
  • Sales tax: As a cannabusiness operator, you don’t need to worry about sales tax unless you’re selling cannabis items in the retail market. If you’re simply selling cuttings (clones), seeds, and immature plants to cultivators and small growers, sales and use tax won’t apply to your operation. So long as the products grown from your immature plants, seeds, and clones will be resold as part of the cultivator’s regular business operations, you won’t have to worry about sales and use tax.

Choosing the Right Nursery Grow Site

outdoor cannabis nursery greenhouse

Outdoor Nursery

The right grow site makes a world of difference when operating a cannabis producing garden. A production facility might be better than a retail storefront, especially from a financial standpoint.

As a garden operator, you’ll benefit from having a remote location for your operation. These tend to be more secure, offer logistical benefits, and encourage future expansions.

Depending on your state, you might face restrictions if you plan to produce and open a grow facility. This could mean you’ll need to steer clear of public schools, transit centers, libraries, parks, and places that cater to minors.

Some states require outdoor production facilities to have an established location that’s enclosed by a wall. For example, Washington State needs nurseries to have a physical barrier that’s at least eight feet tall. Other states, namely Colorado, require cannabis growers to grow in a secure, enclosed grow that includes semi-permeable roofing and tall fences.

The Pacific Northwest allows outdoor cannabis production, which is great for plants that are 10 feet tall or more. These areas allow large-scale outdoor cultivation operations, and these businesses will want to get to know your plant nursery from the bare root all the way to the leaves!

indoor cannabis nursery

Indoor Nursery Facilities

A different type of grower will want to check your indoor plants from the bare root to their leaves; these growers go for quality as opposed to quantity, allowing nurseries to serve exclusively to a premium market as the cannabis industry expands.

The plant material that comes from indoor grows is what makes these high value plants so expensive. And while the costs might rise with an indoor grow, you’ll save because, besides the additional costs for lighting and other materials, you can bypass the commercial outdoor machinery and use a few hand tools instead.

Finding an indoor nursery facility can be a challenge. But if you purchase the land or location, you can bypass landlords that prefer to rent to nurseries that grow trees and shrubs rather than this federally prohibited plant.

Considering the benefits of having an indoor nursery. For starters, you’ll have complete control over everything. This means the humidity, light, and pests are all under control at all times. However, you’ll still need to maintain proper light levels and keep your nursery as energy-efficient as possible.

cannabis plants in pots at nursery

What You’ll Need for an Indoor Nursery

Each plant will require extensive care. But if cared for properly, you’ll earn a nice living working for your nursery.

If you’re new to the cannabis space, you’ll need to start with the basics. This means gaining some insight by performing some research in accordance with the seeds you plan to grow.

Depending on the strain, you’ll need to adjust the grow to its needs. Some seeds might do well with more humidity, while others will need dryer air to guarantee top-quality cuttings.

A greenhouse-specific HVAC system could also be a good investment for your indoor plant grow. These are perfect for closed nurseries and ensure your facility maintains the necessary grow conditions for healthy plant production.

Pots are also crucial for your garden. While pots might not seem so important if you have an outdoor grow, your choice for pots in an indoor grow makes a world of difference.

You’ll need 5-gallon pots to hold your plants. Since the roots expand rapidly, you’ll need plenty of room. Having larger pots for your plants ensures they have enough space to grow their root systems. But in some cases, grow bags will work for your plants.

Some high-end cultivators use permeable concrete pots with soil. This allows natural water recycling. However, if you’re interested in collecting some of the water from runoff, wooden pallets can work.

You’ll also need to consider the lights. Climate and light control are essential for the cannabis plant, regardless of the strain. This is especially true for those growing indoor as opposed to outdoors.

Energy-efficient lighting will ensure you get your dollars worth for energy consumption. The lights do all the heavy lifting to provide each plant with the energy they need to thrive.

cannabis plant lighting in nursery

More on Lighting & Electrical

Electricity costs can get out of hand for cannabis growers. This is why it’s essential to think about the lighting and electrical costs for your business. The two main options are HPS and LED grow lights. Here’s a bit more insight into each of these options:

hps grow light in cannabis nursery

HPS Grow Lights

HPS grow lights are the more affordable option. These generate a lot of heat, and the ballasts are usually installed in a separate room. While it’s true you’ll increase your energy costs with an HPS system, you can also save money by avoiding installation costs for ducting systems.

Another vital component when looking at indoor cannabis grow lights: is light penetration. High-quality light penetrates deep into the plants, helping to form potent buds with fewer leaves; this ultimately means higher yields and better nursery business practices for your indoor operation.

LED Grow Lights in cannabis nursery

LED Grow Lights

The LED choices for growers have actually been around for quite some time. But they’ve only recently become a popular choice because of their efficiency compared to other bulbs on the market today. For anyone interested in saving energy, these are a great option.

LED grow lights are also small in size and can be used for specific plants that require more humid conditions than others. Also, the LED growers allow you to control your specific yield time when growing cannabis indoors as well.

Ventilation Systems

A good ventilation system is one last consideration before setting up an indoor nursery for cannabis.

Cannabis requires high-quality air circulation. And filtering systems ensure that only clean air reaches your plant’s desired environment.

Poor ventilation will leave cuttings exposed to pests, mildew, mold, or even other environmental contaminants, which may destroy potential yields by devastating the plant growth cycle if left unchecked.

A bit of research regarding airflow and filtration will help you to set up the best possible environment for your indoor cannabis grow.

growing cannabis plants in a nursery

Growing Plants for Your Nursery Business

If you’re planning to grow cannabis plants and sell them as a nursery for extra pocket money, you might not be in the right business. While this could work for a small town operation interested in selling trees, flowers, and plants in small pots, cannabis is a different breed.

Growing cannabis as a nursery is expensive. You’ll likely need to test your plants’ genetics during a full bloom to have insight for the people interested in your seeds and cuttings. Your whole process will need documentation, including photos and videos. This is where you’ll get the information you need to show interested growers.

Depending on the grower, each is looking for something that appeals to them. For instance, some would prefer to grow short and wide plants. But for those with limited space, tall and thin plants might be the preference. With this in mind, you’ll need to grow a seed from each strain to maturity to offer growers an example of the final product. Offer growers a certificate analysis to showcase the quality of your end product, too.

It’s also important to keep your nursery clean and safe. You want interested growers to be able to trust that you’ve treated your cuttings with care.

Your cannabis plants should always look healthy, so it’s crucial to properly plan out your nursery and make sure all of the growing conditions are ideal for the cuttings and seeds.

Concluding on Starting a Nursery for Cannabis

Whether you’re just now breaking into the cannabis space or have been operating for a while, you’ll need to gear up for the competition.

Because there’s easy access to information online, it’s become easier than ever before to start your own business specializing in plants, seeds, and clones. But keep in mind that cannabis is still federally illegal. You might need legal advice about how to approach this market without running afoul of federal law surrounding marijuana.

Each plant you grow is an investment. If you’re not sure that your grow is the best quality, you’ll need to ensure your customers are happy with their purchases. Maybe consider offering them a small discount on any future purchase if they return for seeds or clones in the future.

If you’re thinking about getting into the cannabis growing business, there’s plenty of information out there to help you on your way. You’ll need a nursery license, as well as a few other permits, but with the right resources, you can have a successful business.

Looking for additional insight to scale your operation? Northstar is here to guide your success!

Contact us now to speak with one of our experts about taking your operation to the next level!