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How is New York going to deal with illegal cannabis operations?

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  • Staff Report 

As New York’s cannabis industry begins to come online, lawmakers are pushing to reform the state’s tax system and crack down on illicit shops in the next budget.

New York is unlike other states that legalized recreational cannabis as marijuana distributors face a potency tax based on the level of THC in their products, on top of another 13% retail tax.

New legislation was introduced this week to repeal the potency tax that distributors pay when products are sold to a dispensary, a form of double taxation that advocates and lawmakers say is costly to emerging cannabis businesses and must be fixed in the next budget before more stores open this year.

The proposed changes would simplify the industry’s taxation, which advocates say is critical before the state’s recreational cannabis market becomes fully operational.

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Legislation to repeal the potency tax would also raise the retail tax rate for cannabis customers from 13% to 20%, but ultimately reduce the overall cost of the product by a few dollars, Castetter said. The existing THC tax drives prices of cannabis products, especially edibles with greater potency, much higher.

The Assembly bill, sponsored by Majority Leader Crystal Peoples-Stokes, was introduced Friday.

Officials like New York City Mayor Eric Adams are pleading for more law enforcement resources to crack down on illegal marijuana sales most prevalent in the city, but open statewide.

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Sen. Liz Krueger sponsors legislation to give the Office of Cannabis Management (OCM) more power and resources to go after the unregulated illegal market. It would clarify OCM’s seizure powers and add language to allow the state Department of Taxation and Finance to enforce tax penalties for illicit cannabis sales.

Gov. Kathy Hochul proposed $22 million in her executive budget for the state Office of Cannabis Management and law enforcement to address the issue.

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