On February 28, 2019, the Vermont Senate approved S. 54 in a veto-proof, 23-5, vote. The bill, which has moved to the House, would regulate cannabis businesses and tax cannabis sales at 16%, plus a 2% local option tax. It would also change “marijuana” to “cannabis” throughout the Vermont statutes and would shift oversight of the medical cannabis program from the Department of Safety to a new independent commission beginning January 1, 2021. Here is a summary of the bill’s key provisions.
State Regulation and Licensing of Cannabis Businesses
- An independent commission within the executive branch — the Cannabis Control Board — would regulate and license adult-use cannabis businesses. It would be composed of three full-time members. The governor would appoint the chair, who must have a background in business management or regulatory compliance. The Senate Committee of Committees would appoint one member, who would have a background in agriculture or horticulture. The Speaker of the House would appoint the final member, who would have a background in systemic social justice and equity issues.
- The board would appoint a full-time executive director and hire a full-time administrative assistant. The director would hire additional staff.
- The board would license cannabis retailers, cultivators, product manufacturers, wholesalers, and testing labs. Employees would also register with the board.
- The board would develop comprehensive rules, including governing security, lab testing, health and safety, labeling, recordkeeping, and transportation; restricting advertising; mandating child-safe packaging; and prohibiting products designed to appeal to children. It would also determine qualifications for licensees.
- Cannabis products could not include nicotine or alcoholic beverages.
Promoting Small Businesses and Vermont Control
- When licensing businesses, the board would be directed to prioritize Vermont businesses, including the existing medical cannabis dispensaries. It would also prioritize applicants with plans that are environmentally sustainable, businesses that are owned by minorities or women, businesses that pay living wages and offer benefits, and businesses with specific plans to foster social justice and racial equity.
- Small cultivators would receive preference in the initial licensing process “in an effort to encourage small local farmers to enter the market.”
- Secure, outdoor cultivation would be allowed.
- The board would be required to consider the interests of small cultivators when adopting rules and make exceptions where appropriate.
- Each applicant could only hold one license of any type, at one location.
- Localities could enact regulations and licensing requirements, limit the number of cannabis establishments, or ban cannabis businesses altogether.
- Cannabis would be subject to a 16% special retail tax. Municipalities could impose a 2% local option tax if they host a retailer. Medical cannabis would not be taxed. Standard sales taxes would not apply to cannabis.
- Fees would be determined by the board, which may develop tiered fees. The fees would be set at a rate designed to provide enough funding for the Cannabis Control Board’s regulatory costs.
- $810,000 is appropriated in fiscal year 2020 from the Cannabis Regulation Fund to the Cannabis Control Board, in anticipation of revenue being generated.
Taxation, Fees, and Distributing the Revenue
- Cannabis would be subject to a 10% retail tax. Municipalities could impose a 1% local option tax if they host a retailer. Medical cannabis would not be taxed. Standard sales taxes would not apply to cannabis.
- Fees would be determined by the board, which may develop tiered fees.
- The board would begin rulemaking on or before October 1, 2019.
- The board would begin accepting applications for cultivators and testing labs by September 15, 2020, by November 15, 2020 for product manufacturers and wholesalers, and by January 15, 2021 for retailers.
- The board would begin issuing licenses for cultivators and testing labs by December 1, 2020, by February 1, 2021 for product manufacturers and wholesalers, and by April 1, 2021 for retailers.
- Increases patients’ possession limits from two to three ounces and adds any cannabis grown by the patient’s two mature (and seven immature) plants.
- Transfers the regulatory authority for the medical cannabis program to the Cannabis Control Board on January 1, 2021. The board will set licensing fees.
- Medical cannabis sales from dispensaries are tax-free to patients and caregivers.