Will Canada leave cannabis tourism high or dry?

Will Canada leave cannabis tourism high or dry?

Photo courtesy of Kryptokronic

As we all know, cannabis is set to be legalized in Canada come July 2018, and with that deadline, provinces and municipalities are scrambling to get their infrastructure and retail models for cannabis ready.

While many of the provinces have focused on how Canadians can access and use cannabis, not much time has been spent on the out-of-province and international travelers who may want to check out what the cannabis scenes are all about.

Cannabis tourism already exists in Canada

But that’s not to say that cannabis tourism doesn’t already exist in Canada. Despite non-medical cannabis being illegal since 1923, there have always been tourists visiting Canada who have been interested in everything that Canadian cannabis has to offer, especially in the major metropolitan centers of Vancouver and Toronto.

Even before Canada began taking the steps towards legalization, Canadian cannabis was known around the world for its quality- BC Bud has been a household name for cannabis connoisseurs for decades.

Abi Roach, the owner of Toronto’s Hot Box Cafe, told Metro Canada that 40-50% of her annual visitors are from out-of-town or out-of-country.

Nowadays, cannabis in Canada is easier to buy than ever on both coasts of the country because of the influx of dispensaries willing to sell to anybody over the age of 19, which is very encouraging for tourists without a medical license.

CLN has covered cannabis tourism in Canada before, such as when Canna Tours Canada launched back in March 2016, and in the time since, the burgeoning cannabis tourism industry has only grown. Tour agencies, such as Canada High Tours, are all eagerly awaiting legalization but at the same time, they face some major uncertainty.

The Big Question: Where can cannabis be consumed?

According to Matt Kronin, the CEO and founder of Canada High Tours, “We are still waiting to hear on the ‘Where can I consume?’ challenge. Will the government allow the lounges to take in recreational use? I think they will have to here”.

With hotels banning smoking in their rooms, tourists have few options where they can safely consume although there are some cannabis- friendly Airbnb’s out there. But tourists aren’t the only ones affected by a lack of consumption spaces. Canadians who live in condos, apartments, and renters of all stripes often face the same dilemma.

As Toronto City Councillor Glenn De Baeremaeker told CBC, “If you want to do it in the privacy of your own home, you can do that. There is nothing stopping anyone from smoking in their own home, condo or apartment unit, so there is no need for a lounge”.

But with his argument, one must wonder if Coun. De Baeremaeker has ever had to deal with strata, or has even lived in an apartment or condo, because it is never that easy- regardless if you’re an owner or renter.

What might we see in the future?

Matt Kronin, from Canada High Tours, envisions a robust cannabis tourism industry, saying, “We believe we are going to see a huge demand from the public to be educated in ‘cannabis culture’ – both domestically and from international tourists alike”, but acknowledges that it still hinges on the government’s framework and whether lounges will be allowed and regulated.

While we wait for the rules to be cleared up, tour agencies are putting together tour packages in anticipation of legalization with something for everyone- from “Nervous 1st Time Buyer” tours to classes on joint rolling and growing your own cannabis.

(Why?)

Published at Tue, 07 Nov 2017 12:03:45 +0000

Major Michigan Announcements: Licensing Checklist, Proposed Capitalization Requirements, Other Important Standards

Major Michigan Announcements: Licensing Checklist, Proposed Capitalization Requirements, Other Important Standards

Major Michigan Announcements: Licensing Checklist, Proposed Capitalization Requirements, Other Important Standards

At today’s meeting of the Michigan Medical Marihuana Licensing Board (Board), the State’s Department of Licensing and Regulatory Affairs (LARA) unveiled a checklist for medical marihuana license applications, announced proposed capitalization requirements, and sought public input on other regulations for marihuana facilities.

All of this activity comes as LARA prepares to issue emergency rules for operators under Michigan’s new Medical Marihuana Facilities Licensing Act (MMFLA). As regular readers of this blog know, the State will begin accepting applications for medical marihuana operations on December 15. LARA will be releasing emergency rules next month, and is preparing for a “road show” to provide details to the public.

One of the most hotly anticipated rule topics under the MMFLA is the level of capital LARA will mandate potential applicants to demonstrate. LARA today announced that it is recommending that all applicants be required to show access to liquid assets sufficient to cover capital requirements, fees and assessments, and some period of operational costs. While LARA has not yet defined what types of funds may be used to satisfy capital requirements, the Department will require that a CPA attest to an applicant’s ability to access funds. LARA’s recommended requirements are as follows:

  • Class A (500 plant) Grower: $150,000
  • Class B (1,000 plant) Grower: $300,000
  • Class C (1,500 plant) Grower: $500,000
  • Processor: $300,000
  • Provisioning Center (retailer): $300,000
  • Secure Transporter: $200,000
  • Safety Compliance Facility (testing lab): $200,000

The above capital requirements will be applied on a per license basis for applicants who seek multiple licenses. Thus, someone seeking to hold 5 Class C licenses would have a capital requirement of $2,500,000. Someone seeking to vertically integrate with a Class B license, processor license, and single store would have a requirement of $900,000.

Not surprisingly, LARA’s proposed numbers were the source of great controversy and debate. Board Members David LaMontaine and Vivian Pickard expressed concern that the numbers could prevent small businesses and incumbent caregivers and dispensaries from obtaining licenses. Board Members Don Bailey and Nichole Cover, however, noted that the requirements are far lower than many other states, and that the State has an interest in ensuring that licensees are viable, as struggling businesses may be more tempted to divert marijuana outside of the regulated system.

During public comment, many speakers echoed the concerns of Mr. LaMontaine. Others took issue with the concept that capitalization should be examined in reference to liquid assets. They pointed out that many existing caregivers, as well as more prepared applicants, have already made their capital expenditures for equipment and buildings. Such assets, they argued, should thus be counted toward fulfilling the State’s requirements.

In addition to capital levels, LARA also discussed proposed insurance requirements. LARA is considering requiring $100,000 in premises coverage, vehicle insurance consistent with Michigan’s no-fault requirements, and some level of insurance for professional liability and pollution. Participation in workers’ compensation insurance will also of course be required.

LARA next announced its proposal for THC limits in infused products. The Department first explained that LARA will not have any potency limits applicable to extracts or concentrates, as the State does not consider them to be infused products. Rather than having blanket THC limits, LARA will impose limits on 3 categories of infused products, as follows:

  • Edibles: 500 mg THC per container, 50 mg THC per serving.
  • “High potency” products (tinctures): 1000 mg THC per container.
  • Topicals: 6% THC by volume.

All products must test for homogeneity within +/- 10 percent.

Finally, LARA announced its intention for daily purchase limits. LARA ultimately determined that the daily purchase limit should equal the possession limit under the State’s Medical Marihuana Act, which is 2.5 ounces of flower or the equivalent for infused product. Although some Board members took the position that LARA should impose weekly or monthly limits, to prevent patients from acquiring the maximum every day, the Department responded that its analysis of the law is that the State does not have the authority to set such limits.

LARA will take the feedback from today’s meeting and use it to craft final emergency rules, which we anticipate to be released next month. LARA will also incorporate recommendations from work groups formed to advise it on these rules—those recommendations will be the subject of another blog post in the immediate future.

After revealing its intent with regard to those specific rules topics, LARA announced that it has prepared a licensing checklist, which was made available at the end of today’s meeting. While not all-inclusive, and subject to change, the checklist will allow potential applicants to begin to assemble the materials needed to apply for a license. That checklist should be made available on the Department’s web site shortly.

As always, check back with Dykema’s Cannabis Law Blog for further updates.

(Why?)

Published at Mon, 16 Oct 2017 16:00:00 +0000

Alcohol industry targets pot with Constellation-Canopy deal

Alcohol industry targets pot with Constellation-Canopy deal

The Columbian / Associated Press

Alcohol industry targets pot with Constellation-Canopy deal

Alcohol giant Constellation Brands is making a foray into marijuana, a precedent-setting move for an industry that has mostly stayed on the sidelines during the cannabis boom.

Constellation will pay about $191 million (C$245 million) for a 9.9 percent stake in Canopy Growth Corp., a Canadian seller of medicinal-marijuana products. The deal kicked off the biggest rally in nearly a year for Canopy, which trades on the Toronto Stock Exchange under the ticker WEED.

The legalization of marijuana in Canada and a growing number of U.S. states is opening up a huge potential market — just as demand for alcohol is slowing. Still, pot remains prohibited at the U.S. federal level, meaning American companies have to tread carefully.

Constellation, based in Victor, New York, said it has no plans to sell cannabis in the U.S. or other markets until it’s legal “at all government levels.” For now, it’s more a matter of identifying markets with growth potential, said Chief Executive Officer Rob Sands, whose company sells Corona beer, Svedka vodka and other brands.

“Our company’s success is the result of our focus on identifying early-stage consumer trends, and this is another step in that direction,” he said in a statement.

The deal values Canopy at roughly C$2.5 billion, catapulting the business into the highest echelons of the marijuana industry. Constellation would become the company’s biggest shareholder.

As part of the Constellation agreement, the two companies will collaborate on cannabis-based beverages that can be sold as adult products — but only in places where the products are legal at the federal level.

Canada plans to legalize recreational marijuana by July 2018, but the initial product offerings such as edibles and cannabis-infused beverages will be limited, Canopy CEO Bruce Linton said. Such products will be phased in as Canada moves to extinguish the black market in the coming years.

“This looks a lot like the new normal,” Linton said by phone, noting that Canopy and Constellation have a “blank sheet” to create cannabis-infused beverages. “There’s no need to include alcohol, nor is there an intent to include alcohol in how we follow through with things.”

In the U.S., 64 percent of the population now wants to lift the ban on cannabis, according to a Gallup poll released last week. That’s the widest margin since the firm began asking about the topic in 1969, when only 12 percent of the population approved.

Eight states and Washington, D.C., have legalized marijuana for adult use. That means one in five Americans over 21 are allowed to eat, drink, smoke or vape cannabis — even though it remains illegal at the federal level. The states are Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon and Washington.

Twenty-one additional states allow it for medicinal purposes. The legal cannabis market was $6 billion last year and is expected to reach $50 billion by 2026, according to Cowen & Co.

The Constellation deal includes warrants that will let it eventually double its stake. The purchase is expected to close during the company’s third fiscal quarter.

Constellation is paying C$12.98 a share, 1.5 percent above Canopy’s closing price of C$12.79 at the end of last week. Shares of the marijuana seller, which is based in an old Hershey chocolate factory in Smiths Falls, Ontario, had already surged 40 percent this year.

“We see this transaction as a game-changer for Canopy, as well as the industry at large,” Beacon Securities analyst Vahan Ajamian said in a note. He recommends buying Canopy shares and raised his target price to C$16.50 from C$14.

The Constellation transaction could be the first of many, Ajamian said.

“We suspect more alcohol companies may look to accelerate plans to enter the industry — as well as pharmaceutical and tobacco companies,” he said.

— Jennifer Kaplan and Jen Skerritt contributed to this story.

(Why?)

Published at Tue, 31 Oct 2017 13:00:30 +0000

Michigan Gets Recommendations for Medical Marijuana Rules, New Advisory Panel Members

Michigan Gets Recommendations for Medical Marijuana Rules, New Advisory Panel Members

Michigan Gets Recommendations for Medical Marijuana Rules, New Advisory Panel Members

Back in August, Michigan’s Department of Licensing and Regulatory Affairs (LARA) announced the formation of “work groups” to provide input as LARA adopts emergency rules to govern activities under the State’s new Medical Marihuana Facilities Licensing Act (MMFLA). Organized around the MMFLA’s five license types, those work groups met last month. At today’s meeting of the Michigan Medical Marihuana Licensing Board, LARA unveiled summaries of the work groups’ recommendations.

Processors

  • THC limits: labels should indicate THC mg per unit versus per package; if limits are set on a per package basis, should be 1000 mg, with dose size indicated.
  • Security and safety protocols should be required.
  • Product regulation: edibles should be shelf-stable and not require refrigeration; edibles should be tested to ensure safe consumption after 90 days in storage.
  • Product remediation: if marihuana fails mold tests, the batch should be tested again; if it fails for pesticides, all of the batch should be rejected and destroyed.

Growers

  • Labs should be licensed first to avoid bottlenecks as the system comes on-line.
  • Pesticides: State should provide list of approved and unapproved pesticides.
  • State’s capital requirements should allow buildings to count toward asset requirements.
  • “Stacking” of multiple grow licenses: no consensus; some favored free market, others wanted protectionism for small growers.

Safety Compliance Facilities

  • Mold testing should be modeled on some set of national standards.
  • Quarterly quality assurance testing should be conducted.
  • On-site testing should be allowed, with lab employees going to growers.
  • Edibles should undergo long-term storage testing to establish expiration dates.
  • Action should be taken against facilities that have product repeatedly fail tests.

Provisioning Centers

  • Daily purchase limits: 2.5 ounces flower or equivalent; perhaps a monthly limit.
  • Packaging: labels should identify product, quantity, batch and lot number, allergens, expiration date, warnings and instructions. Should not be enticing to children.
  • Training for employees should be required.

Secure Transporters

  • Standards should address security and storage limits.
  • Vehicles should have 360 degree camera coverage visible inside, lockable barriers that prevent driver access to cargo, shatterproof windows, and ability to notify law enforcement of emergencies.
  • 24/7 operation should be allowed.
  • Drivers should have flexibility to alter routes.
  • The BIG debate: should drivers be allowed to carry firearms?

The recommendations above are obviously the tip of the iceberg; the work groups covered far more than was reported. LARA will now use these recommendations as the State develops emergency rules.

Going forward, it is unclear if the work groups will continue. The work groups were instituted by LARA because the MMFLA required the Governor to appoint an Advisory Panel by March 20, 2017, and Gov. Rick Snyder did not do so. At the time, the Governor’s office explained that the Panel could not be appointed because it must include representatives of different types of MMFLA licensees, and no licenses would be issued until sometime in 2018. The position of the Governor’s office changed, however, as just last week, the Governor announced appointments for the other specified categories. Those appointments include:

  • Roseville Police Chief James Berlin, representing police.
  • Mason County Sheriff Kim Cole, representing sheriffs.
  • Wayne County Director of Commission Affairs Alan Helmkamp, representing counties.
  • Attorney for Michigan Townships Association Catherine Kaufman, representing townships.
  • Medical director of Doc Greens Clinic Dr. Saqib Nakadar, representing physicians.
  • Accountant Paul Samways of Cannabis Accounting, representing patients.
  • Grand Rapids Planning Director Suzanne Schulz, representing cities and villages.

In addition to the above appointees, the MMFLA provides that the Advisory Panel must include the Attorney General and the directors or designees of LARA, Michigan State Police, the Department of Health and Human Services, and the Department of Agriculture and Rural Development.

As for the representatives of the MMFLA’s license classes, Gov. Snyder stated that he will appoint those members once licenses have been issued. Whether LARA will look to work groups for industry input in the interim remains to be seen.

As always, check back with Dykema’s Cannabis Law Blog for further updates.

(Why?)

Published at Mon, 16 Oct 2017 16:00:00 +0000

The Future of Canadian Cannabis

The Future of Canadian Cannabis

Despite no evidence of organized crime in the illegal cannabis industry, that growers, dispensaries, and other value-added producers are “paper criminals” interested only in producing a quality product or service in a free and fair market — the government still insists on eradicating this current industry.

Looks like the future of Canadian cannabis rests on perpetuating the licensed producer scheme the Harper government set up.

Oh, sure, Justin’s Liberals plan to ease the regulations so that “anyone” can become an LP, but even this promise (assuming they keep it) buckles under scrutiny.

For starters, the future of Canada’s cannabis industry is in intellectual property rights, not producing an agricultural product like a pharmaceutical (and badly too, as the recalls have indicated).

Since everyone will be entitled to grow, and since no one will follow the mandatory government seed program, crafting your own plant genetics is what will separate the winners from the losers.

And assuming the rest of the world catches up with Canada on legalization, the idea that Canada’s cold climate will somehow be a beacon of cannabis production is downright laughable.

Allan Brochstein, a financial analyst, said it best when he told the Globe and Mail,  “There’s a lot of people that are in the marijuana industry – [but] they’re not in the marijuana industry. They’re in the stock-promotion industry.”

He was, of course, referring to the LPs.

LP valuations aren’t based on cannabis production, but rather, an over-reliance on balance sheets. Investors are buying their debt. Even with recreational legalization, there aren’t enough Canadian consumers to cover their debt and financial leverage commitments.

And with legalization around the world, the Canadian LPs will become irrelevant. Unless, of course, they protect their brand while shipping production off to Mexico.

Sorry, Smith Falls. Looks like Canopy/Tweed is going the way of Hershey Chocolate.

As financial investor Anthony Wile wrote in the Toronto Sun, “Canada does not offer the appropriate climate to produce these products in either an environmentally friendly and natural manner or a cost structure necessary to eliminate the black market… Embracing international trade with countries better suited to marijuana cultivation is the right thing to do on all counts — environmental, cost and social impact.”

Canada’s domestic cannabis industry is akin to the dot-com bubble from the late 90s/early 2000s.

Soaring stock prices with valuations in some cases exceeding $1 billion is lunacy.

However, from the ashes of the dot-com bubble, companies like Amazon, Godaddy and eBay, emerged intact.

Therefore, some of Canada’s LP will likely survive. In fact, home-growers will probably find it lucrative to sell their popular genetics to LPs to be mass-produced in Mexico or California.

Visit any community in this country and you see the same thing — Walmart, Canadian Tire, Tim Hortons, Boston Pizza and other corporate chain-stores.

Local mom and pop small-businesses are becoming fewer and farther between. Instead of becoming entrepreneurs, this generation is burden by real estate at bubble prices and crippling student loans.

Already established entrepreneurs are suffering from excessive bureaucratic red-tape and a complicated tax-code.

Corporate concentration is as Canadian as maple syrup and the Mounties.

Why would the legal cannabis industry be any different?

(Why?)

Published at Thu, 02 Nov 2017 22:08:29 +0000

Michigan Seeks Comment on Tax Treatment of Marijuana Sales

Michigan Seeks Comment on Tax Treatment of Marijuana Sales

Michigan Seeks Comment on Tax Treatment of Marijuana Sales

The Michigan Department of Treasury (the “Department”) recently released a draft Revenue Administrative Bulletin (“RAB”) entitled Marihuana Provisioning Center Tax and Sales and Use Tax Treatment of Marihuana. An RAB is a directive issued by the Bureau of Tax Policy. The following is an excerpt from the Department’s website describing RABs, generally:

Its purpose is to promote uniform application of tax laws throughout the State by the Bureau of Tax Policy personnel and provide information and guidance to taxpayers. A Revenue Administrative Bulletin states the official position of the Department, has the status of precedent in the disposition of cases unless and until revoked or modified, and may be relied on by taxpayers in situations where the facts, circumstances and issues presented are substantially similar to those set forth in the Bulletin. A taxpayer must consider the effects of subsequent legislation, regulations, court decisions and Bulletins when relying on a Revenue Administrative Bulletin. See RAB 1989-34 for further information.

The draft RAB explains the marihuana provisioning center tax imposed by the Medical Marihuana Facilities Licensing Act (the “MMFLA”) and the sales and use tax treatment of marihuana and marihuana-derived products under both the MMFLA and the Michigan Medical Marihuana Act (“MMMA”). While the draft RAB makes conclusions (discussed below) regarding significant marihuana tax issues, it has not been finalized and thus should not yet be relied upon by taxpayers. The draft RAB is open for review and comment to the general public until November 6, 2017.     

The draft RAB makes conclusions on the following three issues: (i) a provisioning center tax, (ii) return and remittance requirements, and (iii) sales and use tax.

Provisioning Center Tax

The MMFLA imposes a tax on gross retail receipts of a provisioning center (dispensary) at a rate of 3 percent. Because the tax applies to all gross receipts, the Department concludes that the provisioning center tax is not limited to marihuana-derived products. Rather, the tax also includes non-marihuana sales such as paraphernalia, clothing, food and other tangible personal property or service. In essence, under the Department’s interpretation, all retail sales made by licensed provisioning centers are subject to the provisioning center tax.

Return and Remittance Requirements and Procedures

The MMFLA requires provisioning centers to remit the provisioning center tax to the Department by 30 days after the end of the calendar quarter for the preceding calendar quarter. The draft RAB states that the remittance must be accompanied by a form prescribed by the Department. The form will require a disclosure of the provisioning center’s gross quarterly retail receipts as well as the amount of provisioning center tax due.

The Department is proposing that the return and remittance of tax will be required to be submitted electronically through Michigan Treasury Online. One significant issue not addressed in the draft RAB is how unbanked businesses are supposed to make payments if the only means the State allows is an online system.

Sales and Use Tax

Under current law, the General Sales Tax Act (the “GSTA”) imposes a 6 percent sales tax on the gross proceeds of all persons engaged in the business of making sales at retail. Similarly, the Use Tax Act (the “UTA”) imposes a 6 percent tax for the privilege of using, storing or consuming tangible personal property in Michigan, if no sales tax has been paid on that property.

The draft RAB states that all retail sales of marihuana and marihuana derived products by a provisioning center will be subject to sales tax. Further, a registered caregiver under the MMMA “may receive compensation for costs associated with assisting a registered qualifying patient in the medical use of marihuana.” Under the MMMA, the compensation received by the caregiver does not constitute the sale of controlled substances. Accordingly, a caregiver’s service is a non-taxable service and not subject to sales tax. The Department, however, is taking the position that a patient who receives marihuana from a caregiver will be subject to a use tax at a rate of 6 percent of the purchase price of the marihuana. The use tax is supposed to be remitted and reported annually on the patient’s Michigan Individual Income Tax Return.

Finally, the draft RAB states that marihuana-infused products (i.e., edible substances, beverages, etc.) are not eligible for the sale/use of food exemptions under the GSTA and the UTA because they are consumed for their medicinal value rather than nutritional purposes.

When it comes to calculating the amount of sales and use tax, the draft RAB states that the sales and use tax bases include the 3 percent provisioning center tax. By way of example, the draft RAB sets forth the following illustration:

“ABC, Inc. is a provisioning center. ABC sells marihuana to Customer for a sales price of $100. ABC is liable for $3 in tax under the MMFLA (i.e., provisioning center tax). ABC also is liable for sales tax based on 6 percent of $103, which amounts to a sales tax liability of $6.18.”

As noted above, the draft RAB is open for review and comment to the public until November 6, 2017. Anyone wishing to offer comments to the Department should email the Department’s tax policy division at treas_tax_policy@michigan.gov .       

As always, check back with Dykema’s Cannabis Law Blog for further updates.

(Why?)

Published at Mon, 23 Oct 2017 16:00:00 +0000

Here is the First Fortune 500 Marijuana Stock

Here is the First Fortune 500 Marijuana Stock

By Charles Bovaird, Investopedia.com

Constellation Brands, Inc. (STZ)—a Fortune 500 company that owns brands such as Corona beer, Black Velvet Whisky and Casa Noble tequila—recently agreed to take a 9.9% stake in Canadian marijuana company Canopy Growth Corp. (TWMJF). The two companies plan to work together to develop and market beverages that will be infused with Cannabis, according to The Wall Street Journal. (For more, see also: Top 4 Marijuana Stocks to Watch.)

Legalization Spreads

Rob Sands, president and CEO of Constellation Brands, told The Journal that the U.S. government will probably legalize marijuana at the federal level in the coming years, considering “what’s happened at the state level.” Even if these expectations don’t materialize, his company could sell marijuana-infused beverages in Canada, where they are expected to be legalized by 2019.

Since Canopy Growth is the world’s largest publicly traded marijuana company, the decision made by Constellation Brands gives the beverage maker a strong presence in the marijuana industry, The Journal reported.

Shifting Demographics

Constellation Brands made this move at a time when there is evidence that some consumers are reducing their alcohol consumption in favor of marijuana, according to Fortune.

“We believe alcohol could be under pressure for the next decade,” analysts for Cowen Inc. (COWN), led by Viven Azer, wrote in a note earlier this year, Fortune reported. “Consumer survey work suggests [about] 80% of consumers reduce their alcohol consumption with cannabis in the mix.”

Currently, 28 states and the District of Columbia have legalized marijuana in one capacity or another, according to The Journal. Should more states permit the use of this drug, consumption could rise sharply, providing a strong market for edibles that are infused with marijuana. (For more, see also: Which States Have Legal Pot & Will It Stay Legal?)

About Anthony Martinelli

Anthony, co-founder and Editor-in-Chief of TheJointBlog, has worked closely with numerous elected officials who support cannabis law reform, including as the former Campaign Manager for Washington State Representative Dave Upthegrove. He has also been published by multiple media outlets, including the Seattle Times. He can be reached at TheJointBlog@TheJointBlog.com.

(Why?)

Published at Tue, 31 Oct 2017 18:43:57 +0000

Michigan Seeks Comment on Tax Treatment of Marijuana Sales

Michigan Seeks Comment on Tax Treatment of Marijuana Sales

Michigan Seeks Comment on Tax Treatment of Marijuana Sales

The Michigan Department of Treasury (the “Department”) recently released a draft Revenue Administrative Bulletin (“RAB”) entitled Marihuana Provisioning Center Tax and Sales and Use Tax Treatment of Marihuana. An RAB is a directive issued by the Bureau of Tax Policy. The following is an excerpt from the Department’s website describing RABs, generally:

Its purpose is to promote uniform application of tax laws throughout the State by the Bureau of Tax Policy personnel and provide information and guidance to taxpayers. A Revenue Administrative Bulletin states the official position of the Department, has the status of precedent in the disposition of cases unless and until revoked or modified, and may be relied on by taxpayers in situations where the facts, circumstances and issues presented are substantially similar to those set forth in the Bulletin. A taxpayer must consider the effects of subsequent legislation, regulations, court decisions and Bulletins when relying on a Revenue Administrative Bulletin. See RAB 1989-34 for further information.

The draft RAB explains the marihuana provisioning center tax imposed by the Medical Marihuana Facilities Licensing Act (the “MMFLA”) and the sales and use tax treatment of marihuana and marihuana-derived products under both the MMFLA and the Michigan Medical Marihuana Act (“MMMA”). While the draft RAB makes conclusions (discussed below) regarding significant marihuana tax issues, it has not been finalized and thus should not yet be relied upon by taxpayers. The draft RAB is open for review and comment to the general public until November 6, 2017.     

The draft RAB makes conclusions on the following three issues: (i) a provisioning center tax, (ii) return and remittance requirements, and (iii) sales and use tax.

Provisioning Center Tax

The MMFLA imposes a tax on gross retail receipts of a provisioning center (dispensary) at a rate of 3 percent. Because the tax applies to all gross receipts, the Department concludes that the provisioning center tax is not limited to marihuana-derived products. Rather, the tax also includes non-marihuana sales such as paraphernalia, clothing, food and other tangible personal property or service. In essence, under the Department’s interpretation, all retail sales made by licensed provisioning centers are subject to the provisioning center tax.

Return and Remittance Requirements and Procedures

The MMFLA requires provisioning centers to remit the provisioning center tax to the Department by 30 days after the end of the calendar quarter for the preceding calendar quarter. The draft RAB states that the remittance must be accompanied by a form prescribed by the Department. The form will require a disclosure of the provisioning center’s gross quarterly retail receipts as well as the amount of provisioning center tax due.

The Department is proposing that the return and remittance of tax will be required to be submitted electronically through Michigan Treasury Online. One significant issue not addressed in the draft RAB is how unbanked businesses are supposed to make payments if the only means the State allows is an online system.

Sales and Use Tax

Under current law, the General Sales Tax Act (the “GSTA”) imposes a 6 percent sales tax on the gross proceeds of all persons engaged in the business of making sales at retail. Similarly, the Use Tax Act (the “UTA”) imposes a 6 percent tax for the privilege of using, storing or consuming tangible personal property in Michigan, if no sales tax has been paid on that property.

The draft RAB states that all retail sales of marihuana and marihuana derived products by a provisioning center will be subject to sales tax. Further, a registered caregiver under the MMMA “may receive compensation for costs associated with assisting a registered qualifying patient in the medical use of marihuana.” Under the MMMA, the compensation received by the caregiver does not constitute the sale of controlled substances. Accordingly, a caregiver’s service is a non-taxable service and not subject to sales tax. The Department, however, is taking the position that a patient who receives marihuana from a caregiver will be subject to a use tax at a rate of 6 percent of the purchase price of the marihuana. The use tax is supposed to be remitted and reported annually on the patient’s Michigan Individual Income Tax Return.

Finally, the draft RAB states that marihuana-infused products (i.e., edible substances, beverages, etc.) are not eligible for the sale/use of food exemptions under the GSTA and the UTA because they are consumed for their medicinal value rather than nutritional purposes.

When it comes to calculating the amount of sales and use tax, the draft RAB states that the sales and use tax bases include the 3 percent provisioning center tax. By way of example, the draft RAB sets forth the following illustration:

“ABC, Inc. is a provisioning center. ABC sells marihuana to Customer for a sales price of $100. ABC is liable for $3 in tax under the MMFLA (i.e., provisioning center tax). ABC also is liable for sales tax based on 6 percent of $103, which amounts to a sales tax liability of $6.18.”

As noted above, the draft RAB is open for review and comment to the public until November 6, 2017. Anyone wishing to offer comments to the Department should email the Department’s tax policy division at treas_tax_policy@michigan.gov .       

As always, check back with Dykema’s Cannabis Law Blog for further updates.

(Why?)

Published at Mon, 23 Oct 2017 16:00:00 +0000

Number of fatal crashes involving drivers with marijuana in their system up since legalization

Number of fatal crashes involving drivers with marijuana in their system up since legalization

The Columbian / Associated Press

Number of fatal crashes involving drivers with marijuana in their system up since legalization

YAKIMA — The number of fatal Washington crashes involving drivers with marijuana in their system rose to 79 last year — more than double that of 2012 when voters legalized its recreational use.

In Yakima County, however, the number has remained essentially unchanged at an average of about five a year, according to the state Traffic Safety Commission.

But experts caution the statistics focus only on fatal crashes and don’t provide a complete picture of the impact pot is having on road safety.

When issuing impaired driving citations, most police agencies don’t differentiate between alcohol, pot or other drugs. They’re simply categorized as DUIs.

As a result, data regarding marijuana-impaired drivers isn’t complete. No statewide data is kept on serious injury accidents involving marijuana because of reporting inconsistencies by local police agencies, according to the safety commission.

Also, researchers are studying if current methods of testing for marijuana impairment and whether the current legal limit of THC in a person’s system is an accurate assessment of impairment.

From a traffic safety standpoint, the state wasn’t ready for the legalization of recreational marijuana, said Nathan Weller, a Pullman-based consultant helping Washington State University with a marijuana-impairment study.

“The amount of challenges that went along with it was unknown at the time (of voter approval) and now we’re playing catch-up,” he said.

Data shortfall

The Yakima Police Department has seen the number of DUIs creep up since pot was legalized, from 296 in 2012 compared with 331 in 2016. But like so many other agencies, it doesn’t track what substance caused the impairment.

State lawmakers would have to mandate such a tracking system before departments would take on that responsibility, said Debbie Stadler with the department’s records office.

Assessing whether a driver is impaired by marijuana often is difficult, let alone establishing a tracking system, said Yakima County Prosecuting Attorney Joe Brusic.

Unlike alcohol, marijuana is stored in a person’s fatty tissue, which can cause a regular user to test for high concentrations in their system without being high at the time.

On the flip side, a driver could be high on pot by ingesting it without noticeable signs of impairment, Brusic said, all factors that can make it difficult to prove marijuana use as the cause of a particular incident.

“In my opinion, we may never get to the point where we can track it like alcohol,” he said.

Sobriety tests

Most officers use a standard field sobriety test that initially focuses on impairment rather than determining whether a driver is over the legal limit, said Washington State Patrol Sgt. Brandon Villanti, who works in the impaired driving unit in Seattle.

“We look for impairment and inability to provide attention, motor skills, ability to operate a motor vehicle,” he said. “So our officers are not making an arrest on legal limit but on impairment, and that is confirmed with a blood or breath test.”

But those tests may not be adequate considering the variables of involving marijuana intoxication. Eating pot products can take one to five hours before the peak affect kicks in, compared to the more immediate affect produced by smoking it. That can make it difficult to determine the level of impairment at the time of an accident, Weller said.

For example, someone who smoked it may have a low level of THC in their blood an hour later even though they were high when they were driving, he said.

A person who ingests pot may not have been high at the time of driving but later test positive at a police station, Weller said.

And pot is hard for users to regulate compared with alcohol. For many people it’s safe to drive one hour after a drink, two hours after two drinks, and so on because the amount of alcohol in each drink is regulated.

But quantifying the amount of THC in products isn’t as easy, Weller said.

Participants described getting higher off some products that claimed to have lower THC concentrations than others, he said.

“It’s a rabbit hole right now,” Weller said. “We’re just scratching the surface.”

Researchers in the WSU study are working on developing a Breathalyzer similar to ones used to detect alcohol, he said.

Similar work is being done in Colorado, where fatal crashes involving marijuana have shot up since legalization there in 2012.

Villanti said there are times when a blood test may not reveal the impairment an officer sees on the road. Depending on the case, a drug recognition expert may be brought in to investigate. There are 200 recognition experts in the state who can not only identify a substance of drug but calculate what a person’s level of intoxication was hours before a test, he said.

Experts are usually brought in to investigate serious injury crashes. Villanti said.

“If it’s a vehicular homicide, I think we’re definitely going to put in the resources needed to prosecute,” he said.

(Why?)

Published at Tue, 03 Oct 2017 16:05:51 +0000

Cannabis Trimming Parties

Cannabis Trimming Parties

As a child of the rural Ontario countryside, I witnessed the great undertaking of making Maple Syrup many times.  For some of my neighbors boiling tree sap into syrup was not only a cause for great labour but also a cause for visitors and late night card games that played out like celebrations.  These farmers would harvest sap like this every Spring working their normal tireless pace around the farm by day and then boiling watery sap to silky syrup till late into the night.  Neighbors and relatives alike stopped by to help or deal a hand or two, the game often ending only when someone fell asleep at the table.  

From tapping to collecting, boiling to perfecting, Maple Syrup production is proof that humans and nature can be partners through the seasons.  I see this in other Canadian products too.  Ontario is famous for its Maple Syrup while British Columbia is famous for its Cannabis- or “BC Bud” as it’s also known worldwide.  I’m sure the fall season in B.C. also sees friends and neighbors gather to help with the huge undertaking of harvesting and trimming the many indoor and outdoor Cannabis crops.

I predict this for Ontario and the other provinces too.  Only after the harvest & trim is finished does the celebration begin.  Or did it begin months ago when those seeds first popped?  In fact I really hope that Canadians get creative with their growing and sharing.  Remember cookie exchange parties?  Why not Cannabis exchange parties?  Heck, make it vegetable exchange parties too!  You grow the THC strains and I’ll grow the CBD strains.  I’m currently growing Green Kale with my Cannabis plants!  Each of our medicine cabinets and fridges will have exactly the strains and veggies we need.  

We Cannabis growers are proudly green-thumbed and ready to celebrate the way other Canadians do when harvesting sap or hay or vegetables!  Growing as a way of life is a big part of what speaks to us as Canadians and I really welcome legalization as a way for many of us to get back to our roots and get back to nature.  We may all find that partnership with nature, feels right to us too.


(Why?)

Published at Mon, 23 Oct 2017 16:00:08 +0000