Last month, New York Gov. Andrew Cuomo approved a legislation legalizing marijuana and its possession for individuals aged 21 and above in the states. However, the substance will not be available for legal sale until 2022. The governor and his aides expect that this move will create 60,000 employment opportunities while generating roughly $350 million in tax revenue once the industry’s up and running.
While the proposed tax for recreational cannabis in the state isn’t as high as Washington, DC’s tax on the substance, it is higher than the average of the 15 states that have legalized the herb as well.
Similar to other states that have legalized cannabis, the state of New York is planning on combining wholesale tax, which encompasses distribution and production with retail taxes, which includes sales and excise tax. The proposed tax rate, 13%, is lower than the 20% that the governor had initially proposed.
The difference is seen when one looks at how products will be taxed. Unlike other states, which based the wholesale tax on factors such as volume or weight, the state of New York is planning to base its wholesale tax on the THC amount in products.
This makes it the first state in the country to tax THC levels, which makes it hard to pinpoint exactly where the state will rank in overall cannabis taxes when legal sales commence, with many noting that it may end up with higher taxes in comparison with neighbor states such as Massachusetts, Vermont and New Jersey.
A report on THC tax and its consequences, which has been co-authored by Castetter Cannabis Group, highlights how imposing a THC tax may make it more complex to pay taxes because calculations will be made on how THC level will be measured, how it will be assessed and who will pay the tax. A clause in the report also raises concern that the tax may favor large-scale producers at the expense of small-scale producers.
However, there are those who believe that taxing products based on THC is a good move. One of them, marijuana law specialist Rob DiPisa, states that the levels of THC are growing more important as the marijuana industry moves into edible products and concentrates. DiPisa notes that New York may be focused on THC as it drives the growth and value in the industry, adding that it may set a trend that other states will follow.
Experts also note that while the wholesale THC-based tax has been written into law, it’s difficult to see how it will work without regulations to clarify several issues.
As the recreational cannabis market takes shape in New York, industry players in other jurisdictions have moved to the level of formulating therapeutic products that could gain FDA approval in the not-so-distant future. A case in point is XPhyto Therapeutic Corp. (CSE: XPHY) (OTCQB: XPHYF) (FSE: 4XT), which so far has three candidates at different stages of development.
NOTE TO INVESTORS: The latest news and updates relating to XPhyto Therapeutics Corp. (CSE: XPHY) (OTCQB: XPHYF) (FSE: 4XT) are available in the company’s newsroom at https://cnw.fm/XPHYF
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