Maryland is still on track to launch a marketplace for selling recreational cannabis starting July 1 after the state Senate approved its plan on Friday. Adults 21 and older can possess up to 1.5 ounces of cannabis and use the drug.
The General Assembly has given priority to keeping taxes low to curb illegal sales.
But before they can proceed, versions of the bill from both houses must agree before being sent to the governor’s desk. And right now they don’t.
As the Senate worked on the basis of the House bill, they made some remodeling over time. The Senate redistributed the tax revenue and proposed starting with a higher levy.
The legislature still has 10 days in the legislative period to work out the details. Here is some of the work ahead of them:
No smoking in onsite cannabis lounges
Both bills create an on-site consumption license. On-premises businesses are allowed to distribute cannabis in a facility where cannabis can also be consumed.
However, if the Senate law measures prevail, customers will be able to consume products such as groceries, but will not be allowed to smoke in these stores.
The adjustment came after senators feared they were creating legislation that would conflict with the state’s Clean Indoor Air Act, the law that bans smoking in public buildings.
The Senate tax rate is higher
Both chambers agree that they want to crush an illicit cannabis market by keeping prices down, and that includes taxes.
The proposed tax rate in each invoice was one of the main differences. The Senate version proposes a flat rate of 9%, starting directly on July 1st. This is higher than the 6% starting point recommended by the House of Representatives. The House of Representatives proposed an incremental increase of 1% per year until 10% is reached in 2027.
But whatever lawmakers choose, it would still be one of the lowest tax rates among states with regulated recreational markets.
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Medicinal cannabis remains tax-free.
How revenue is distributed
Most of the tax revenue will fund government oversight of the newly created industry. However, some portions will flow back into communities that have been disproportionately harmed by cannabis prohibition.
The bills also create a Community Reinvestment and Repair Fund to help communities that have been disproportionately affected by the past criminalization of cannabis.
The House of Representatives treated the fund with 30% of revenue and the Senate with 35%. An initiative to combat the health effects of cannabis legalization and the Cannabis Business Assistance Fund will each receive 1.5% of the proceeds, according to the House of Representatives. But if you ask the Senate, they settled on 5% for both. The support fund will help young entrepreneurs.
A larger piece for the counties
From the start, county and local governments expressed concern that the House bill was not giving them enough cuts. The Senate thought so too and disagreed. Let’s break this down.
Under the House version of the bill, counties and municipalities would receive 1.5% of revenue generated in their jurisdictions. For example, if the state took $1,000,000 in cannabis revenue from Montgomery County, the state would take 6%, which is $60,000. However, Montgomery County would take 1.5% of the $60,000 or $900.
In the house version, there is another cap on that $900. The funds would have to be used for behavioral health and drug treatment programs.
According to the Senate version, and with their 9% tax rate, the state would collect $90,000 in tax revenue and $4,500 would go to the county without telling the county how it would be spent. However, it would be up to the county to give a share to the communities within the county – so in our hypothetical example, Montgomery County would decide whether to share the funds with Gaithersburg, Rockville, or other cities.
There are 157 parishes in Maryland, including Annapolis and Baltimore City.
Fewer micropharmacy licenses cut off
Both chambers largely agreed on the type and number of permits.
The difference here was a decrease in the overall number of micropharmacy licenses. A micro pharmacy license is a delivery service, essentially a pharmacy without a storefront. This license type allows an entrepreneur to start a cannabis business with less capital.
The House of Representatives recommended starting the delivery service program with a trial of 10 licenses and reserving 190 more for a future license round, based on the outcome of a study. The Senate included 10 micro-pharmacy licenses in its bill and stopped there.
