“While momentum is high as we approach 2025, there is still a tax issue jeopardizing the New York cannabis market, and we need decisive action to support the very businesses driving the industry’s growth.”
By Nicolas Guarino, Jaunty
As we close out 2024, New York’s licensed adult-use cannabis market has officially kicked into high gear. We saw a record-breaking $100 million sales in August, and the state’s Office of Cannabis Management (OCM) is expecting sales to reach or even pass $1 billion by the end of the year.
After weathering a 2023 filled with limited openings, oversupply and stunted growth due to lawsuits, the state now has well over 200 licensed stores open—with more on the way, as we expect to reach 500 legal dispensaries across the state by the end of 2025.
Businesses that weathered tough times in the early days of adult-use legalization in New York have more reasons to be optimistic for the future than ever before. We’re moving closer to realizing the full potential of an industry that not only benefits businesses owners, employees and their customers, but also generates significant revenue for our communities and state—estimated at $1 million total tax revenue per store opened, which includes excise taxes and final sale cannabis taxes.
The Tax Burden
While momentum is high as we approach 2025, there is still a tax issue jeopardizing the New York cannabis market, and we need decisive action to support the very businesses driving the industry’s growth.
A crucial step forward would be for New York State Gov. Kathy Hochul (D) to sign a bill, A.10196/S.9359, that is sitting on her desk right now and would shift the filing of wholesale taxes for cannabis cultivators and processors from a quarterly cycle to an annual one. This change may seem technical, but it carries immense implications for the sustainability and scalability of our burgeoning industry.
The current “quarterly payment system” poses two key problems: It requires businesses to pay taxes in advance, before receiving payments from that period’s sales, plus it mandates a tax of nearly 25 percent of sales, including excise and point-of-sale tax, on an industry that is still finding its footing and has not yet established fully stable profit margins.
This current system makes it unnecessarily difficult for businesses to pay their bills while also covering all their operational costs, which is unprecedented for a new industry.
The reason why it’s difficult to keep up with the quarterly schedule is mainly logistical: Producers and distributors often haven’t yet received payment from the retailers who purchase their products. Although retailers operate on a 30-day payment schedule, the ongoing banking constraints facing the cannabis industry often cause delayed payments, with invoices being fulfilled at later dates.
An annual tax payment schedule would allow businesses to catch up and collect all the funds they’re owed, and then seamlessly pay their state taxes.
New York isn’t the first licensed market to navigate this issue. California’s taxation, credit and debt difficulties have been well documented, with industry stakeholders forming a coalition, Financial Stability for California Cannabis (FSCC), to raise awareness about payment dilemmas and potential solutions.
We need to stop hindering the potential of legal cannabis here in New York, and there’s no reason why our industry shouldn’t be treated on the same playing field as the alcohol sector, which has the option to pay taxes annually.
The financial strain this quarterly tax schedule poses is even more pronounced for smaller operators, including the equity license holders our state has promised to open up opportunities for. They are already working tirelessly to compete with more highly capitalized multi-state operators and establish their foothold in the market.
Fortunately, New York’s legislators agree. The bill has been passed by both the Senate and the Assembly, and is awaiting Gov. Hochul’s signature.
It’s among a group of cannabis industry-related bills awaiting the governor’s signature. Others include a bill to classify cannabis as an agricultural product, which is key to protecting farmers from local overtaxation, and another bill that would start paving the way for sales at public events.
Call To Action For Gov. Hochul
While those aforementioned bills are also important, the tax bill is especially timely in order to navigate an expanding marketplace. Transitioning to an annual filing system would allow businesses to better manage cash flow, invest in growth initiatives and adapt more effectively to market demands as more stores open and more potential customers have access to a range of products. This would not only foster a healthier business environment, but also empower more independent operators to enter the market, further diversifying our industry.
Moreover, the annual filing would align more closely with the realities of agricultural cycles and product development timelines. Cannabis cultivation, like any agricultural endeavor, is subject to seasonality and unpredictability. An annual tax filing would recognize these nuances and allow growers and producers to plan more effectively, ensuring we can contribute to the market’s growth without the constant stress of quarterly deadlines.
Gov. Hochul has shown her commitment to creating an equitable and flourishing cannabis landscape in New York. She has even stated, “We promised to build the strongest, most equitable legal cannabis market in the nation, and we’re announcing long-needed steps to make New York’s cannabis program work as promised.”
Now, by signing this bill, she would send another clear message that our state is serious about supporting its cannabis businesses—especially legacy, equity and other small and independent operators. A thriving industry is not just about sales figures; it’s about sustainable practices that empower businesses to grow responsibly while contributing to the economy.
The potential of New York’s cannabis market is enormous. With the right support—like the proposed shift to annual wholesale tax filings—we can harness this potential and build an industry that not only meets consumer demand but also fosters innovation, job creation and more equitable business opportunities throughout the whole state.
Nicolas Guarino is the co-founder and CEO of Jaunty, a New York cannabis brand formerly known as Naturae. He’s also the co-founder of the Empire Cannabis Manufacturers Alliance.
“While momentum is high as we approach 2025, there is still a tax issue jeopardizing the New York cannabis market, and we need decisive action to support the very businesses driving the industry’s growth.” By Nicolas Guarino, Jaunty As we close out 2024, New York’s licensed adult-use cannabis market has officially kicked into high gear. Read More
