New Jersey voters recently approved a constitutional amendment to legalize marijuana, making the Garden State the fourth most populated State to legalize recreational cannabis. This move will establish a brand-new industry that will create thousands of essential jobs and could generate more than $126 million of annual tax revenue once the market is established.
Although voters approved the legalization of adult-use cannabis, adults 21 and older will have to remain patient before they can begin legally purchasing and consuming cannabis. First, the State must establish the rules and regulations that will govern the legal cannabis market and set the groundwork for the licensing and application process. Once New Jersey begins accepting applications, new entrepreneurs will start the rigorous and competitive application process. The State must then review applications and conduct inspections before issuing operational licenses to new operators. This process could take years; however, a Marijuana Sales Bill (S-21/A-21) introduced on Thursday, November 5, 2020, could help get products on the shelves much sooner.
This bill was introduced by Sen. Nick Scutari (D) and Senate President Stephen Sweeney (D), and provides the first detailed look at how New Jersey’s cannabis market might function. Hearings over this bill were scheduled for Monday, November 9, 2020, and lawmakers are hopeful that the legislation will pass by November 16. If passed, this bill would allow the State’s nine existing medical marijuana companies to sell their excess cannabis to recreational users. The only problem – there is no excess cannabis available at the moment. Any allocation of the current medical supply to recreational will create shortages for medical patients who need cannabis the most.
New Jersey Medical Marijuana legislation was signed into law in 2010, and over 80,000 patients have registered under the program. Constraints and challenges created by Covid-19, compounded with a newly expanded list of approved medical conditions created an increase in medical patients, have recently sparked supply constraints for many New Jersey dispensaries – further driving the demand up and supply down. Existing production capacity cannot adequately meet the State’s medical patients’ needs and supply the significant influx of recreational users. During a recent webinar, Sen. Scutari said, “If it happened tomorrow, I don’t think we have an operator that would be ready to start selling adult use. They still have a lot of work to do.”
This recently passed legislation allows adults 21 and older to purchase and possess up to an ounce of cannabis or five grams of cannabis concentrate. Under the new legislation, retail dispensaries can operate throughout the State, but local jurisdictions may enact temporary or permanent moratoriums. However, delivery services are allowed to operate statewide regardless of any local jurisdiction bans. Dispensaries could allow on-site consumption, as long as they have local approval.
A State sales tax of 6.625%, plus a 2% municipal tax, would be imposed on any cannabis purchases, which combined would amount to the nation’s lowest cannabis tax. A legal cannabis market comes with challenges from the black market, and this lower tax rate should help pull sales from the illicit market to licensed operators. In a legal cannabis market, licensed cultivators and dispensary operators must adhere to strict operational regulations and restrictions. These regulations ultimately provide a safe place to cultivate and purchase cannabis and ensure that all cannabis products entering the legal market (recreational and medical) undergo strict quality control and laboratory testing procedures to provide the highest quality and cleanest cannabis for purchase.
Illicit operators are not concerned with compliance or regulations; they don’t have packaging and labeling requirements, and they aren’t required to lab test their material. Scott Rudder, former New Jersey legislator and president of the CannaBusiness Association, stated, “People are selling it on the street at a much lower rate, we want to make sure that we’re getting to the point where our prices are much more attractive to people who want to go to a legal market, who want to buy something that they know they can trust.” New Jersey is poised to be part of the biggest adult-use cannabis markets in the world.
If you are interested in exploring new business opportunities in the New Jersey Recreational Cannabis market, now is the time to start planning. Although the State isn’t issuing licenses just yet, it’s never too early to begin your business plan or scout for locations. The cannabis industry moves very fast, and any head start captured will give you a significant competitive advantage.
Contact us now to learn more about Recreational New Jersey Cannabis License business opportunities
Andy is an Operations Advisor at Catalyst BC.