#MACoCon Debrief: Adult-Use Cannabis: Taxes, Zoning, and Safety – Oh My!

At the MACo Summer Conference, an expert panel provided insight into Maryland’s adult-use cannabis law, including best practices for navigating the fast-changing political, social, and regulatory landscape.

After an overwhelming share of Marylanders approved a referendum to legalize adult-use cannabis, the Maryland General Assembly passed sweeping legislation to address cannabis taxes, licensing, oversight, and more.

However, many questions remain about the burgeoning industry. Ambiguous restrictions on local zoning, incommensurate revenue sharing, human resources considerations, public health, and public safety are all top of mind for county governments.

Senator Melony Griffith led the conversation and moderated an informative Q&A at the “Adult-Use Cannabis: Taxes, Zoning, and Safety – Oh My!” MACo Summer Conference session.

As Chair of the Senate Finance Committee, Senator Melony Griffith was deeply involved with the legislation – presiding over bill hearings and committee work sessions, leading stakeholder discussions, and gathering community input.

In providing opening remarks at the session, Maryland Comptroller Brooke Lierman announced that her office would release a detailed annual report on state and local cannabis revenues. Comptroller Lierman expects the first report in October.

Panel speakers included:

  • Will Tilburg, Director, Maryland Cannabis Administration
  • Rob Scheerer, Director, Revenue Administration Division, Comptroller of Maryland
  • Roscoe Leslie, County Attorney, Worcester County
  • Major Zachary O’Lare, Acting Deputy Chief, Bureau of Investigation, Prince George’s County Police Department

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Will Tilburg started the session by providing a comprehensive overview of the omnibus adult-use cannabis bill. Tilburg said the law was crafted to avoid mistakes in other states that approved adult-use cannabis before Maryland but added that tweaks are likely in the 2024 legislative session.

“Every year, there are a few hundred bills related to the alcohol industry. So, we expect that in the 2024 session and moving forward, we will see additional legislation to tweak this industry,” said Tilburg. Senator Griffith agreed, adding, “I don’t think there’s any possibility we get through the 2024 session without some tweaking on the cannabis [law].”

Major Zachary O’Lare provided a law enforcement perspective on adult-use cannabis, including concerns over impaired driving and a sharp decline in illegal handgun seizures since the law took effect. According to Major O’Lare, in 2022, 40 percent of illegal handguns seized in Prince George’s County resulted from searches where the odor of cannabis was the probable cause.

Maryland’s adult-use cannabis law precludes law enforcement officers from initiating searches based solely on the odor of cannabis. In the first six weeks since adult-use cannabis became legal, handgun seizures are down 49 percent in Prince George’s County, according to Major O’Lare.

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Rob Scheerer explained how his office will collect and remit taxes collected on the sales of adult-use cannabis. In addition to detailing challenges related to the federal prohibition of cannabis, Scheerer explained that while the Comptroller’s Revenue Administration Division has already collected hundreds of thousands of dollars, he expects the lion’s share of revenue will come in late October.

As previously reported on Conduit Street, in July, collective adult-use and medical cannabis purchases reached $87.4 million — more than double the $42.7 million total for June, before the launch of adult-use retail sales, according to the Maryland Cannabis Administration.

While there are no local cannabis taxes in Maryland, the state does levy a 9 percent excise tax on any product containing cannabis. But, a mere five percent of state cannabis tax revenue goes to local governments. That translates to local governments receiving a mere 45 cents for a single purchase of $100 of cannabis- the smallest in the nation.

While implementation across jurisdictions has been a variable as different states have taken various approaches, one commonality is that virtually all states have empowered a meaningful local revenue source to support local services. Some have fully authorized local excise taxes where rates are set and collections are overseen locally. Others have authorized local sales taxes at either standardized or variable rates locally.

For example, in New York, there is both a 13 percent excise tax (9 percent state and 4 percent local) on cannabis sales (paid by consumers and remitted by retailers) and a potency-based tax (remitted by distributors). Oregon levies a 17 percent excise tax on cannabis sales paid by consumers and remitted by retailers. Local governments can also levy up to a 3 percent tax on the retail price.

Municipalities will receive half of the local revenue share for transactions within municipal boundaries (counties will retain the other half on such transactions). In addition, 35 percent of the tax proceeds will go to the Community Reinvestment and Repair Fund, a new fund for local organizations that support marginalized communities.

Roscoe Leslie detailed concerns over ambiguous zoning restrictions. While the law does attempt to grant local governments reasonable zoning authority for adult-use cannabis, its wording may leave that intention subject to legal challenge.

For example, the law specifies that a local jurisdiction may “establish reasonable zoning for cannabis businesses” and that a local jurisdiction may not “establish zoning or other requirements that unduly burden a cannabis licensee.” These phrases introduce undefined terms that will effectively defer to the courts to set the true standard for what is reasonable or unduly burdensome.

The session was on August 18 at the Roland Powell Convention Center in Ocean City, Maryland.

More about MACo’s Summer Conference: