As 2024 draws to a close, the New Jersey Cannabis Regulatory Commission acted on several items. The latest updates include adjustments to the state’s social equity excise fee and the long-awaited launch of an application process for consumption lounges.
During its Dec. 12 meeting, the regulatory board opted to raise the per-ounce fee collected from cannabis cultivators when they sell or transfer products to other license classes. Starting Jan. 1, 2025, the social equity excise fee (SEEF) will go from $1.24 to $2.50.
Under New Jersey law, the state must allocate funds generated from the fee to initiatives that support education, economic development and social services in communities affected by the war on drugs. The current fee of $1.24 per ounce is down from $1.52 last year, but up from $1.10 during the first year of legalized recreational sales.
Now home to nearly 200 recreational dispensaries, New Jersey brought in an estimated $2.6 million in SEEF during fiscal year 2024.
The CRC initially scheduled considering changes to the fee at its Oct. 30 meeting, but postponed the vote. Commission members had said they needed more time to review a proposal to hike the fee to $30 per ounce.
According to the statute, cultivators pay the fee based on the quantity of usable cannabis produced. It also states the fee “may” be as much as $30 per ounce when the average per-ounce price of legal cannabis is between $250-$350.
Right now, an ounce of cannabis costs about $330.68, CRC acting Executive Director Chris Riggs has said.
Balancing act
Supporters of the higher fee note that New Jersey has one of the lowest cannabis taxes in the country. They also say it could help New Jersey hit its social justice targets.
However, critics believe it could lead to businesses passing the cost onto customers.
Following last week’s vote, New Jersey Cannabis Trade Association Executive Director Todd Johnson said his organization “appreciates the CRC’s deliberative and thoughtful approach in setting next year’s rate, and their willingness to listen to the concerns of the thousands of cannabis industry stakeholders and consumers who expressed grave concerns about the ramifications of a drastically increased SEEF.”
“We are proud to have worked with stakeholders across the industry to gather feedback, recommendations and real stories from operators around the SEEF’s impact on their businesses,” said Johnson.
He went on to say the NJCTA “is hopeful this moderate increase will allow operators to navigate the increased cost of operations without requiring material price impacts for consumers.”
“Moving forward, we strongly support a change in the SEEF mechanism to ensure that when funds are raised and reinvested in underserved communities, it is done so purposefully and intentionally to achieve the intentions of CREAMMA [sic, New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act], while allowing the cannabis industry and budding entrepreneurs to thrive,” he said.
‘New Jersey must do better’
Meanwhile, Ami Kachalia, a campaign strategist with the American Civil Liberties Union of New Jersey, expressed disappointment.
Kachalia said she believes the CRC “failed to live up to its promise to meaningful reinvest cannabis revenue into communities targeted by decades of marijuana criminalization.”
“Both the law and the regulations that followed promised significant reinvestment, indicating the social equity excise fee should be adjusted to 12 times higher than what was approved by the Commission,” she said in a statement.
“Before New Jersey legalized and decriminalized cannabis, the state spent more than $143 million per year to enforce marijuana criminalization – the $4 million raised through the SEEF for community reinvestment in the last two years is just a drop in the bucket. New Jersey must do better to ensure Black and Latinx communities who bore the brunt of past enforcement can benefit from the state’s legal cannabis market,” Kachalia also said.
On-site consumption lounges
Nearly a year after advancing a framework allowing consumption lounges at medical dispensaries and recreational-use retailers, the CRC will soon begin accepting applications for licenses.
Starting Jan. 2, social equity businesses can apply.
According to the CRC, this category is defined by ventures owned by individuals who have lived in one of the state’s 55 economically disadvantaged areas.
A second round of applications will begin April 2 for diversely owned businesses. Those are certified by the New Jersey Department of Treasury as minority-, woman- or disabled veteran-owned.
Finally, the CRC will open the application process to all other Class 5 retail operators July 2.
The fee to apply is $1,000 for all businesses: $200 to submit the application and $800 once approved.
The annual licensing fee is $1,000 for microbusinesses and $5,000 for standard businesses, according to the CRC.
Since it’s up to municipalities to limit the number of cannabis businesses within their borders, the state does not have a cap on the total number of consumption areas statewide.
In addition to being “a good business opportunity for some cannabis retailers,” the commission believes the designated spaces “are considered a crucial tool for providing equitable access for consuming adults since some – such as renters – cannot consumer cannabis in their homes.”
The rules
The CRC initially proposed the regulations in December 2022. The rules establish qualifications, an application process and operation instructions for businesses that wish to set up spaces on premises for customers to use cannabis.
Under the approved regulations:
- Dispensaries may not sell food, but patrons may bring their own food into the cannabis consumption area or have food delivered there;
- Businesses must allow medicinal cannabis patients to bring cannabis items from other retailers into consumption areas for their own use;
- The sale of tobacco products and alcohol is prohibited in consumption areas;
- Patrons must be 21 years or older;
- Photo identification is required for entry into cannabis consumption areas.
The CRC expects to release application documents and other resources on its website within the next week.
Across the U.S., only 11 other states provide regulations for on-site use at dispensaries:
- Alaska
- California
- Colorado
- Illinois
- Maryland
- Michigan
- Missouri
- Minnesota
- Nevada
- New Mexico
- New York
Within New Jersey, several dispensaries aim to open consumption lounges. Those businesses include Hashstoria in Newark, High Rollers Dispensary in Atlantic City and The Other Side Dispensary in Jersey City.
In recent months, some business owners have reportedly expressed frustration over the pace to roll out consumption area licenses in New Jersey.
Last month, Riggs told NJ Spotlight News, “I don’t think there are any obstacles. I think we have the rules in place. I think that we were concerned about the market and making sure that this industry gets established before diving into a new space with consumption areas.”
H/T: njbiz.com
