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Cannabis Business Licensing In New York : Summary of the Marihuana Regulation and Taxation Act

Updated: Nov 3

New York is one of the most anticipated adult use cannabis markets in the world. Tax collection is projected to reach $350 Million annually and potentially create 30,000 to 60,000 jobs. On March 31, 2021 New York's Governor Andrew Cuomo signed the New York Marihuana Regulation and Taxation Act into effect. Since the signing of the Act, Governor Cuomo was replaced by Governor Kathy Hochul who is known to be more pro-cannabis than her predecessor. Though investors and cannabis industry insiders expected there to be much more progress made much sooner, the state of New York has decided to take its time. The Office of Cannabis Management has been assembled and continues to make progress on the soon-to-be New York Adult Use Cannabis Market. The Office of Cannabis Management (OCM) started off with licensing "Conditional" Cultivation licenses to distressed hemp farmers, "Conditional" Processing licenses to distressed hemp farmers, and "Conditional" Adult Use Retail Dispensary Licenses to social justice qualified applicants. Licensing will continue to follow the rules set out in the Marihuana Regulation and Taxation Act which we've summarized for your here.


The intent of the New York Marihuana Regulation and Taxation Act ...


When it comes to creating a regulated cannabis industry every state has it's own goals and they always hope to be better than the states than have come before. New York has a tall order to fill as they have a giant population and have one of the most well known and most watched cities in the world - The Big Apple NYC. Here's what the state is aiming to accomplish as the Office of Cannabis Management moves forward in developing what will be one of the largest and most lucrative cannabis markets known to humankind

  • Regulate, control, and tax cannabis

  • Generate significant new revenue for the state

  • Make substantial investments in communities and people most impacted by cannabis criminalization (most notable, racial and ethnic minorities)

  • Prevent access to cannabis by those under the age of twenty-one years

  • Reduce the illegal drug market and reduce violent crime

  • Reduce participation of otherwise law-abiding citizens in the illicit market

  • End the racially disparate impact of existing cannabis laws

  • Create new industries

  • Protect the environment

  • Improve the state's resiliency to climate change

  • Protect the public health, safety and welfare of the people of the state

  • Increase employment

  • Strengthen New York's agriculture sector



Cannabis industry specific regulators in New York


Each state has its own way of regulating medical and adult use cannabis. New York has created the Cannabis Control Board and the Office of Cannabis Management. The Office of Cannabis Management exists within the division of alcoholic beverage control and is responsible for licensing, regulating, and inspecting businesses that grow, process, distribute and sell medicinal marijuana in New York State.


Office of Cannabis Management


"Chief equity officer" means the chief equity officer of the office of cannabis management.


"Executive Director" means the executive director of the office of cannabis management.


"Cannabis control board" or "board" means the New York state cannabis control board consisting of a governor nominated chairperson, two direct appointments made by the governor, an appointment by the temporary president of the senate and an appointment by the speaker of assembly.



Some Basic Q&A


If you're wondering how to get your cannabis business license in New York, we've got some answers.


First, let's cover some of the most basic and burning questions about cannabis business in New York: What types of businesses will be allowed? What will they be allowed to do? And who will be allowed to take part in business ownership?


What types of Adult Use Cannabis Business Licenses will be allowed in New York?


This summary focuses on cultivator, processor, and retail dispensary licenses, but it should be noted that New York will have a multitude of cannabis business license types, including:


  • Adult-use processor license.

  • Adult-use cooperative license.

  • Adult-use distributor license.

  • Adult-use retail dispensary license.

  • Microbusiness license.

  • Delivery license.

  • Nursery license.

  • On-site consumption license


Adult-use retail dispensary license.


Can my dispensary deliver to customers?

Yes. Retail dispensaries are allowed to participate in the acquisition, possession, sale and delivery of cannabis from the licensed premises of the retail dispensary by such licensee to cannabis consumers.


Can I have more than one dispensary?

Yes, but no more than 3.


If I have a retail dispensary license can I own other types of cannabis businesses in New York?

No


What type of facility do I need for my dispensary?

A storefront with an entrance from the street level that located on a public road and zoned for business, trade, or industry.


The dispensary must be at least 500 feet away from a school and at least 100 feet away from a house of worship.



Adult-use cultivator license


What is cultivation?

Cultivation includes and is not necessarily limited to: the agricultural production practices of planting, growing, cloning, harvesting, drying, curing, grading and trimming of cannabis.


Can an owner of a cultivation own other types of cannabis businesses?

Yes, a person holding an adult-use cultivator's license may apply for, and obtain, one processor's license and one distributor's license solely for the distribution of their own products.


A cultivator (including any of its ownership team members) may not also have a retail dispensary license.


Can I have more than one cultivation license?

No, except if the Cannabis Control Board allows a company with one cultivation license to cultivate cannabis in more than one location.




Adult-use processor license


What is processing?

Processing includes and is not necessarily limited to blending, extracting, infusing, packaging, labeling, branding and otherwise making or preparing cannabis products. Processing does not include the cultivation of cannabis.


Can an owner of a processor license own other types of cannabis businesses?

Yes, a person holding an adult-use processor's license may apply for, and obtain, one distributor's license solely for the distribution of their own products.


A processor (including any of its ownership team members) may not also have a retail dispensary license.


Can I have more than one processor license?

No, unless the Cannabis Control Board releases regulation allowing one processor license to operate at multiple locations.



Ownership Rules


New York understands that innovation and successful enterprise requires competition. There should be opportunities for entrepreneurs AND new big players to enter the cannabis space, a concept that many states haven't seemed to grasp. The Marihuana Regulation and Taxation Act is one of the most progressive cannabis bills that we've seen in any state thus far. It allows for transparency and equal opportunity to all market participants, whether they are newcomers or have been operating in other states thus far - while making sure to place limits on the existing "big cannabis" companies to slow down their ability to take over and to face them with some new contenders in the marketplace. Here are some of the ownership rules:


Cultivators processors and distributors (including any individual members of the ownership team) may not also own a retail dispensary or on-site adult-use consumption facility.

A retail dispensary (including any of its individual ownership team members) may not also own or invest in a cultivator, processor, on-site adult-use consumption facility, or distribution company.


A processing company may not have more than one processor license.


A cultivation company may not have more than one cultivation license.


A retail dispensary company may only have up to 3 dispensary licenses.


Retail dispensaries, cultivators and processors may not sign exclusivity agreements limiting the retailer to selling only one company's product or limiting a processor or cultivator to selling its product to only one dispensary.



Adult Use Cannabis Business Licensing


New York will be issuing adult use licenses to companies that submit applications that meet the requirements and selection criteria set by the Cannabis Control Board. An adult use license includes licenses to cultivate, process, distribute, deliver or dispense cannabis within New York, for sale.


Each license type will have its own application requirements, though there will be some overlap. Any individual, investor or company interested in applying for an adult use license in New York should be aware that a separate license is required for each cultivation, processing, distribution or retail dispensing license. This means that a company that holds one dispensary license can only have one dispensary location and to have multiple locations a company must obtain multiple licenses (limited to 3). The Cannabis Control Board may at some point allow a company with a single cultivator or processor license to operate in more than one location, but no company is permitted to have more than one processor or cultivator license.


As in other key cannabis markets the licensing application process will be intense.


Let's dive into some of the specifics of New York cannabis business licensing. This is all based on what we know so far from Senate Bill 854A which simply sets out a plan for the rules that will be developed. Further regulations with more details will soon be released.



What information will be requested in applications for adult use cultivation, processor, and retail dispensary licenses?


The New York Cannabis Control Board will release a process for license applications. This process must be followed to the finest detail in order for a company to have a chance of receiving a cannabis business license of any type.


Some information that may be requested for license applications includes and is not limited to:


Biographies about each owner, including:

  • Racial and ethnic diversity

  • Evidence of good moral character

  • Experience in business and in cannabis

  • Degrees, certifications or awards

  • Organizational chart for the company including roles and ownership percentages

  • The company's operating agreement

  • Background check for every member of the ownership team

  • Proof of good standing of any other cannabis businesses owned

  • Information about the location where the business will be operated, potentially including:

  • Floor plans

  • Site plans

  • Address

  • Proof of ownership (if property is owned)

  • Proof of intent to buy the property if licensed (if the company intends to buy the property)

  • Proof of landlord's agreement to lease (if the company plans to lease their location).

  • Financial statements from the ownership team. This may include:

  • Tax records from individual team members

  • Bank statements from individual team members

  • Information about where funding for the company will be coming from

  • Financial plan for the company

  • Building Security Plan

  • Product Security Plan

  • Inventory Control Plan

  • Environmental Plan

  • Water Usage Plan (for cultivation license)

  • Power/Electricity Usage Plan (for cultivation and processor license)

  • Waste, Destruction and Disposal Plan

  • Community Impact Plan, including the incubator program

  • Age Verification Plan (for adult use retail dispensary license)

  • Packaging and Labeling Plan

  • Cash Handling Plan

  • Staffing and Training Plan

  • Signed Labor Peace Agreement

  • Letters of support from the community

  • Proof that the locality has been notified of the company's intent to apply for a license. The notification will need to be made to the clerk of the village, town or city, where the business will be located.

  • Diversity and Inclusion Pan

  • Delivery/Transportation plan

  • Signage and Advertising Plan

  • Business Plan

  • Record Keeping Plan

  • Theft, Loss and Diversion Plan

  • Cultivation Plan (for cultivation license)

  • Processing Plan (for processor license)

  • Equipment and Tools Sanitation and Usage Plan (if for cultivation or processor license)

  • Odor Control Plan

  • Noise Reduction Plan (for consumption locations)

  • Pest Mitigation Plan (for cultivation license)

  • Pricing and Supply Plan

  • Distribution Plan (for distribution licensees)



How do you get selected to receive a cannabis business license of any type in New York?


New York will have a fiercely competitive cannabis business landscape, best suited for those ready to build a truly impressive business enterprise. Not only will it be competitive to get a license as not every applicant will receive a license, but every business granted a license will be competing with thousands of other operators and with a booming legacy market. Obtaining a cannabis business license of any kind in New York will be a selective process with explicit criteria for deciding if an applicant will receive a license, or not. These criteria include and are not limited to:


Being able to maintain effective control against the illegal diversion or inversion of cannabis.


Being able to comply with all applicable state laws and regulations. This can be shown by ensuring that regulations pertaining to the license type are included in, and preferably cited in, each section of the application.


The company is ready, willing, and able to properly carry on the activities for which a license is sought including with assistance from the social and economic equity and incubator program, if applicable.


The company possesses or has the right to use sufficient land, buildings, and equipment to properly carry on the activity described in the application or has a plan to do so if qualifying as a social and economic equity applicant.


The company qualifies as a social and economic equity applicant or sets out a plan for benefiting communities and people disproportionally impacted by enforcement of cannabis laws [Community Impact Plan]


Applicants will contribute to communities and people disproportionately harmed by enforcement of cannabis laws through including, but not limited to, the social responsibility framework as provided in section sixty-six of this article and report these contributions to the board.


If the application is for an adult-use cultivator or processor license, the environmental and energy impact, including compliance with energy standards, of the facility to be licensed.


The applicant satisfies any other conditions as determined by the Cannabis Control Board


It being in the public interest that a cannabis business license is issued to the applying company, taking into consideration the following criteria:


  • That it is a privilege, and not a right, to cultivate, process, distribute, and sell adult-use cannabis;


  • The number, classes, and character of other licenses in proximity to the location and in the particular municipality, subdivision thereof or geographic boundary as established by the board


  • Evidence that all necessary licenses and permits have been or will be obtained from the state and all other relevant governing bodies


  • Effect of the grant of the license on pedestrian or vehicular traffic, and parking, in proximity to the location


  • The existing noise level at the location and any increase in noise level that would be generated by the proposed premises


  • The ability to increase climate resiliency and minimize or eliminate adverse environmental impacts, including but not limited to water usage, energy usage, carbon emissions, waste, pollutants, harmful chemicals and single use plastics.


  • The effect on the production, price and availability of cannabis and cannabis products.


  • The applicant's history of violations and compliance with the laws of another jurisdiction, in which they operate or have operated a cannabis license or registration, related to the operation of a cannabis business


  • The applicant's history of violations related to the operation of a business, including but not limited to, violations related to labor laws, federal occupational safety and health law and tax compliance


  • Any other factors specified by law or regulation that are relevant to determine that granting a license would promote public convenience and advantage, public health and safety and the public interest of the state, county or community.


  • The applicant and its managing officers are of good moral character and do not have an ownership or controlling interest in more licenses or permits than allowed by this chapter, or any regulations promulgated hereunder


  • The applicant has entered into a labor peace agreement with a bona-fide labor organization that is actively engaged in representing or attempting to represent the applicant's employees, and the maintenance of such a labor peace agreement shall be an ongoing material condition of licensure. In evaluating applications from entities with twenty-five or more employees, the Office of Cannabis Management will give consideration to whether applicants have entered into an agreement with a statewide or local bona-fide building and construction trades organization for construction work on its licensed facilities



Find this information in Article 4 of the Marihuana Regulation and Taxation Act




Social Equity Applicants


Social equity is a hot topic in the cannabis industry right now as the communities which were disproportionately impacted by the war on drugs are underrepresented in the industry. New York has shown that it's gunning for the position as the most suitable and inclusive cannabis industry in the world, by working to establish a social and economic equity plan that will promote diversity in commerce, ownership and employment, and opportunities for social and economic equity in the adult-use cannabis industry. New York has 150 dispensary licenses issued to social justice involved businesses, and plans to issue 50% of adult-use cannabis licenses to social equity applicants and ensure inclusion of:


  1. Individuals from communities disproportionately impacted by the enforcement of cannabis prohibition

  2. Minority-Owned Businesses

  3. Women-Owned Businesses

  4. Distressed Farmers

  5. Service-disabled veterans


The Cannabis Control Board has given additional priority in licensing to social justice applicants via the Conditional Adult Use licensing for dispensaries, cultivators and processors. There were 903 of these applicants for an available 150 licenses. These applicants demonstrated that the majority of the ownership team are members of a community disproportionately impacted by the enforcement of cannabis prohibition, have an income lower than eighty percent of the median income of the county in which the applicant resides, were convicted of a marihuana-related offense or had a parent, guardian, child, spouse, or dependent, or was a dependent of an individual who, was convicted of a marijuana-related offense prior to the signing of the Marijuana Regulation and Taxation Act.



Social Equity Definitions


"Minority-owned business" is a business enterprise, including a sole proprietorship, partnership, limited liability company or corporation that is:


At least fifty-one percent owned by one or more minority group members


An enterprise in which such minority ownership is real, substantial and continuing


An enterprise in which such minority ownership has and exercises the authority to control independently the day-to-day business decisions of the enterprise


An enterprise authorized to do business in this state and independently owned and operated


An enterprise that is a small business.


"Minority group member" means a United States citizen or permanent resident alien who is and can demonstrate membership in one of the following groups:


Black persons having origins in any of the black African racial groups.


Hispanic persons of Mexican, Puerto Rican, Dominican, Cuban, Central or South American of either Indian or Hispanic origin, regardless of race.


Native American or Alaskan native persons having origins in any of the original peoples of North America.


Asian and Pacific Islander persons having origins in any of the far east countries, south east Asia, the Indian subcontinent or the Pacific islands.


"Women-owned business" means a business enterprise, including a sole proprietorship, partnership, limited liability company or corporation that is:


At least fifty-one percent owned by one or more United States citizens or permanent resident aliens who are women.


An enterprise in which the ownership interest of such women is real, substantial and continuing.


An enterprise in which such women ownership has and exercises the authority to control independently the day-to-day business decisions of the enterprise.


An enterprise authorized to do business in this state and independently owned and operated.


An enterprise that is a small business.


A company owned by a minority group member who is also a woman may be defined as a minority-owned business, a women-owned business, or both.


"Distressed farmer" is a New York state resident or business enterprise, including a sole proprietorship, partnership, limited liability company or corporation, that meets the small farm classification developed by the Economic Research Service of the United States Department of Agriculture, has filed a schedule F with farm receipts for the last three years, qualifies for an agriculture assessment and meets other qualifications defined in regulation by the board to demonstrate that they operate a farm operation as defined in section three hundred one of the agriculture and markets law and has been disproportionately impacted, including but not limited to incurring operating losses, by low commodity prices and faces the loss of farmland through development or suburban sprawl and meets any other qualifications as defined in regulation by board


New York state resident or business enterprise, including a sole proprietorship, partnership, limited liability company or corporation, that is a small farm operator and a member of a group that has been historically underrepresented in farm ownership and meets any other qualifications as defined in regulation by board.


"Service-disabled veterans" means individuals qualified under article seventeen-B of the executive law.


"Communities disproportionately impacted" means a history of arrests, convictions, and other law enforcement practices in a certain geographic area, such as, but not limited to, precincts, zip codes, neighborhoods, and political subdivisions, reflecting a disparate enforcement of cannabis prohibition during a certain time period, when compared to the rest of the state. The board shall, with recommendations from the state cannabis advisory board, the chief equity officer and executive director, issue guidelines to determine how to assess which communities have been disproportionately impacted and how to assess if someone is a member of a community disproportionately impacted.



Conditions of Social Equity


New York will actively promote applicants that foster racial, ethnic, and gender diversity in their workforce. Licenses issued under the social and economic equity plan shall not be transferred or sold within the first three years of issue, except to a qualified social and economic equity applicant and with the prior written approval of the board.



Conclusion

Entrepreneurs and investor shave been preparing to apply for cannabis business licenses in New York since early 2021. The Marihuana Regulation and Taxation Act summarized in this article gives a bare bones framework for the rules of the game and the criteria for being a player. The state is yet to release final regulations, though there has been some general guidance released by the Office of Cannabis Management which shows progress toward official regulations coming soon. Many are waiting on the sidelines until the Office of Cannabis Management releases final regulations and says "GO!" If you're not much of a bystander, contact us today and get started preparing for starting a cannabis business in New York, now.