New York Senator Introduces Bill to Replace THC Potency Tax

The bill would replace the potency tax with a sales tax and increase the excise tax.

The New York Legislature will have a new issue to consider when lawmakers return from their current break on Feb. 27: changing the current cannabis tax structure from one based on THC potency and flower weight to a flat 20% tax.

Sen. Jeremy Cooney proposed the change with the recently-introduced S4831, which, according to Cooney’s office, would do the following:

  • Repeal the THC potency-based portion of the cannabis tax entirely.
  • Increase the existing excise tax on cannabis, from 9% to 16%.
  • Add a 4% sales tax.

“No other state in the country has implemented the potency (THC) tax on adult-use cannabis that New York State has. This tax is excessively complex, costly to cannabis enterprises, and will lead to lab shopping for the best results,” reads a justification memo from Cooney’s office about S4831.

The memo argues that New York “already has a massive and well-established illicit market that has continued to flourish even after adult-use cannabis was legalized, and the THC tax and total tax burden will make this problem far worse.”

The new tax proposal, the bill memo argues, will “better shift the costs away from businesses and consumers.”

In addition, cannabis industry lobbyist Kaelan Castetter said, the bill will do away with the weight-based tax structure, which he said would have cut heavily into wholesale profit margins for cultivators as prices “inevitably come down” over time.

“This is great,” said Castetter, who celebrated the bill’s Wednesday introduction on Twitter. “I’ve been working on this issue for about three years now. … This is the main focus I have lobbying in Albany this year, is to do tax reform. So we’ve been meeting with members and the governor’s office and the (Office of Cannabis Management) for a while now about this.”

Castetter said he’s “cautiously optimistic” that the issue may get traction in the legislature this year, but said some major hurdles are yet to be overcome.

For instance, he noted that the fiscal impact of the tax change has yet to be forecast by state analysts, and the bill itself hasn’t even been scheduled for a committee hearing. And making the case to lawmakers that changing tax policies will actually result in increased state revenues is always challenging, he said.

But, Castetter said, he’s yet to encounter any serious opposition in Albany to Cooney’s proposal. The issue is one that more and more industry advocates have been talking about, particularly now that the New York recreational cannabis market has formally launched and more companies are worrying about competing with the untaxed underground market.

“I think we’re going to see a lot of co-sponsors come in on the Senate side,” Castetter said. “There’s going to be a lot of negotiation. So in order for this tax reform to be successful, it needs to be included in the budget, and the real risk is it just gets buried and doesn’t become a priority.”

John Schroyer

John Schroyer has been a reporter since 2006, initially with a focus on politics, and covered the 2012 Colorado campaign to legalize marijuana. He has written about the cannabis industry specifically since 2014, after being on hand for the first-ever legal cannabis sales on New Year’s Day that year in Denver. John has covered subsequent marijuana market launches in California and Illinois, has written about every aspect of the marijuana trade, and was part of the team that built the cannabis industry’s first-ever trade show, MJBizCon. He joined Green Market Report in 2022.

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