The New York cannabis industry is in the process of expansion. As cannabis becomes more widely accepted and legalized throughout states, consumers are seeing more variety in products and brands.
While many people believe that marijuana is a dangerous substance that needs to be strictly regulated, statistics show otherwise. With this being the case, entrepreneurs interested in becoming part of the state’s recreational cannabis sector must wait as New York decides how it will legalize recreational marijuana.
Those interested in starting a cannabusiness in New York will need to understand marijuana regulation, as well as the cannabis management authority in place. But most importantly, you’ll need to know what’s involved in obtaining a marijuana business license in New York.
In this article, we’ll break down what you need to know about New York cannabis legalization and how to apply for a cannabis license.
Before we get started, let’s first understand marijuana’s legality in the state and how it’s progressed.
Interested in starting an adult use cannabusiness in New York? Contact us today to learn how we facilitate the application process and support legal operations that hold cannabis licenses.
Why Is Marijuana Illegal in New York?
Marijuana has been banned at the federal level since it was first classified as a schedule one drug under the Marijuana Tax Act.
In 1970, New York State legislators passed the Comprehensive Drug Abuse Prevention and Control Act, which classified marijuana as a controlled substance. The legislation defined possession of a small amount of marijuana as an unclassified misdemeanor, with higher penalties for larger quantities.
Governor Andrew Cuomo signed three marijuana bills into law. The legislation created the Compassionate Care Act, which legalized medical cannabis for patients suffering from serious health conditions.
The bill also set up a licensing program to regulate the production and sale of medical flower in New York State. This resulted in the establishment of five producers, or suppliers, who could grow and distribute medicinal cannabis. These are the companies:
- New York Canna
- Fiorello Pharmaceuticals
- Valley Agriceuticals
- Citiva Medical
- PalliaTech NY
The legislation additionally established the Office of Cannabis Management, which was tasked with overseeing and implementing the regulatory framework for cannabusinesses.
Under Cuomo’s leadership, New York has made significant strides in reforming its marijuana laws to meet the needs of its patients. However, New York remains one of the last states in the country that hasn’t legalized recreational cannabis use for adults age 21 and over – until now, that is!
Medical Cannabis & Recreational Marijuana in New York
New York has allowed licensed businesses to dispense medical herbs since 2016, allowing more than 143,000 patients access to their medicine. While it has been one of the slowest states to legalize both recreational and medical marijuana, New York has some of the most progressive cannabis laws in America. The state is now paving the way for broad access to CBD oil products, edibles, and more.
Gov. Andrew Cuomo recently signed a bill that includes provisions to allow individuals convicted of marijuana possession misdemeanor crimes prior to 2019 (when recreational cannabis becomes fully legal in New York) to file a petition for a criminal record expungement through New York’s off-duty conduct law.
Gov. Cuomo also recently announced that the state plans to issue four additional licenses for businesses that want to dispense medical cannabis, an increase from the five currently operating across New York’s 54 counties and five boroughs.
But what about marijuana regulation? How will this work for the retail dispensaries, on site consumption sites, adult use cultivators, and other registered organizations looking to sell cannabis to New York adults?
New York state’s medical marijuana program has done a lot for patients living in the state. Medical marijuana is essential for some, and with medical cannabis legalization, New York has made tremendous strides to ensure cannabis prohibition had minimal impact on patients.
Unlike adult use retail sale cannabis, selling cannabis for medical purposes is a bit more flexible. It’s also a lot less work than selling cannabis for adult use retail sale, as patients and registered organizations can access any of the five medical marijuana companies in New York state to purchase their medicine.
Medical cannabis license holders are not permitted to operate retail dispensaries alongside cultivation or processing operations; they may only have one site location to sell within the state’s medical marijuana program.
Unlike those with an adult use distributor license, licensed distributors of medical marijuana use the state’s program under the guidance initiated by the Cannabis Control Board.
Medical marijuana products are available in New York. But adult use marijuana is still just on the horizon.
Voters legalized recreational cannabis. However, cannabusinesses must wait for marijuana regulation standards to completely outline how the state will legalize recreational cannabis.
New York’s Governor has months to create the rules and regulations that will govern licensed adult use cannabusinesses in New York. Many areas of focus must be addressed, including:
The state is still working on creating a licensing structure for its retail dispensary license. Until they finalize it, things are still up in the air about how the license types will work and how they’ll be issued.
While many business owners are hoping to open their own cannabusinesses, others may see an opportunity to work for a company that already has a marijuana retail license.
Regardless of whether you’re looking at starting your own cannabusiness or joining someone else’s, there are a lot of key aspects to take into consideration.
Local Laws, Ordinances, and Business License Requirements
New York cannabis businesses must abide by state regulations. However, cannabis operators may also be subject to a few local laws and ordinances that regulate where they can operate as well as the overall nature of their business operations.
Localities can have up to three months to approve a business license application.
Business Insurance Options
Under New York’s adult use cannabis laws, cannabis businesses must keep all of their records and materials for at least five years before they are eligible to dispose of them. But there’s more to it than that.
Businesses must also maintain business liability insurance or surety bonds as well as worker’s compensation insurance. Some cannabusinesses may need additional insurance policies depending on their location, building requirements, and projected revenue.
Business Banking Services
New York still has not approved any banking services for cannabis-related businesses. Even when the state begins licensing adult use marijuana companies, they will likely only be allowed to do business with other licensees through a state agency that will be set up to manage all financial operations of the state’s marijuana program.
The state is also still creating regulations to cover business permits. Business permit requirements are different for every municipality in New York, so cannabis operators must check with local and county offices before applying for a state license.
Adult Use Retail Sales Cannabis License Types
As mentioned above, the state is still deciding on the best way to issue cannabusiness licenses and what those licensing options will look like.
Businesses that sell marijuana recreationally must focus on preparing their applications for a license type called an A-license. These licenses will be issued to retailers who can sell both medical and recreational products.
The state may also issue permits for B-licenses or C-licenses. These license types are designed to govern different kinds of cannabis businesses and the products they sell.
Business License Fees
The state has not released any information about what business license fees will look like under its adult use cannabis laws.
State officials have estimated that the application fee alone could be as much as $25,000 with annual renewal costs of up to $20,000. It’s likely that businesses with multiple license types will face even higher fees.
Business License Security Deposits
Business owners who file for a marijuana business license will likely have to pay security deposits depending on how many separate permits they are applying for and the nature of their operations.
Businesses may also be required to make large capital investments when it comes to certain construction and improvements in order to meet the state’s security requirements.
Business License Transferability
Currently, New York does not have any transferable cannabusiness licenses. It is possible that the state will eventually allow businesses to sell their license or use it as leverage to obtain funding for future projects. However, at this point, there’s no license transferability available.
If a company wants to sell its interest in a cannabusiness, it must dissolve the business and start an entirely new one.
Business License Appeals
The rules for appeal and revocation of cannabbusiness licenses are still unclear at this point in time. Business owners who wish to protest or contest pending license denials can expect a lengthy appeals process that may take as long as nine months to complete.
Office of Cannabis Management (OCM)
The Office of Cannabis Management is tasked with the responsibility of managing all financial and operational aspects of New York State’s adult use cannabis program. This agency will be responsible for tracking every ounce of marijuana produced in the state as well as issuing tax receipts to businesses that pay sales taxes on marijuana products.
Commercial cannabis business owners must register with the OCM before applying for all other marijuana licenses.
The OCM will also be responsible for creating and enforcing cannabis business license requirements.
Business License Seals
New York State is developing a unique seal of approval that every marijuana-related business must use on its product packaging, labels and marketing materials.
The state hopes that the seal will enable state authorities to more easily determine whether or not a business is in compliance with all existing adult use cannabis laws.
Businesses found in violation of these rules may face penalties as severe as license revocation or criminal charges.
Business License Certifications for Employees
All employees working within New York’s adult use cannabis industry may have to obtain valid certification from the Department of Health. These certifications will ensure that all workers have received proper training before handling any marijuana products or serving to customers.
New York is expected to release more information about employee training and certification requirements in the near future.
Business License Reporting Requirements
New businesses working within New York’s adult use cannabis industry will be required to report all sales transactions for tax purposes within seven days of a transaction taking place. They must also track inventory levels, control overages and shortages, and report them to the OCM within seven days of discovery.
Business owners are prohibited from selling their marijuana products if the inventory levels do not match up with actual sales numbers. This is to ensure these products don’t end up on the black market. Thus, the business must make corrections and purchase new product until supply matches demand.
New York state will likely release more information about marijuana tax reporting requirements during future advisory board meetings, so businesses working within the industry should check back often for updates.
Business License Tax Requirements
The state marijuana tax rate in New York will depend on a variety of factors that must be weighed by authorized state authorities prior to implementation.
The basic framework of the adult use cannabis program stipulates taxes totaling 9% of sales and 4% local sales tax, but these rates could be adjusted based on the actual market price of marijuana, the consumer’s ability to pay and other variables.
Concluding on New York’s Cannabis-Related Licenses
New York will be making many changes to its cannabis laws and regulations before they go into effect in the near future. Since this is NY State’s first time implementing a marijuana program for adult use, it’s crucial to stay on top of any regulations the state puts in place.
New York will allow businesses to apply for a license to sell marijuana products in the very near future. The state has been working diligently on creating all of the business licenses and regulations necessary to make this program functional.
Before applying for any cannabis licenses, however, business owners must understand all of the laws and procedures involved with becoming a licensed marijuana-related company. This includes if you need an adult use distributor, adult use processor, limited cultivation, retail dispensary, or microbusiness license.
Adult use cannabis sales are set to blow up as soon as the licenses and regulations are in place. Whether you plan to operate a marijuana dispensary, want a nursery license as an adult use cultivator or processor license, need a distributor license, a delivery license, or some other license, keep in mind that the state will only accept applications after all required paperwork is in place and approved.
Looking for help breaking into New York’s recreational sector? Wondering how you can scale your operation in NY?
Contact us now to speak with one of our experts about how Northstar will help your business scale in New York!