EisnerAmper’s Tax Guide can help you identify opportunities to minimize tax exposure, accomplish your financial goals and preserve your family’s wealth.
Please welcome Max Borg, a partner in the Boston based law firm of Burns & Levinson, and a member of the firm’s Cannabis Business and Law Advisory practice.
Max has considerable experience representing licensed cultivators, processors, and dispensaries on a local and a national level.
When cannabis was originally legalized in Massachusetts, particularly for adult use or recreational use, opponents of legalization were very concerned that society would somehow fall apart and that introducing medical, and ultimately adult use dispensaries into the communities would cause a drastic spike in crime rate or health issues.
There’s also been over 700 million in medical sales since March of 2019, which is to say that this has been a major driver of revenue here in the state, and driver of tax revenue.
So to that point, I think folks here in the state are very happy with the results of legalization and its propensity to generate revenue and jobs for the state.EA:So Max, what were some of the issues the first licensees encountered?MB:There were a number of issues the first licensees encountered.
What this is, is a contract between the license holder and the town that specifies the economic terms by which the license holder must abide in order to operate in the town.
And there has been discussion within the Massachusetts legislature about the idea of putting the Host Community Agreement process under the purview of the Cannabis Control Commission, or the CCC to give them a little bit more oversight over this process.
Has been the ability of license holders to gain access to the capital markets, or raising capital to fund their projects.
The reality though is, until the federal government passes safe banking or another type of legislation that’s going to ease the process by which banks can become involved and really bank cannabis companies, it’s going to continue to be a challenge for cannabis companies to raise capital.
On the other hand, as I mentioned earlier, given the fact that there are a number of towns and municipalities that have opted out of cannabis, there’s a limited number of available properties to become a tenant as a license holder.
It just creates a great level of optionality moving forward when you are in control of the property and not subject to the terms of these leases, which may be restrictive on build outs and economic terms. It’s a major advantage when operators are able to hold their own real estate.EA:How long after the state legalization was the first sale of cannabis to a consumer?MB:Adult use was legalized in late 2016.
One interesting trend that I’m seeing is here in Massachusetts, while we have what’s known as a license cap, or the Rule of Threes, where on the adult use side, as a license holder, you’re limited to 100,000 square feet of canopy, or of cultivation space, three dispensary licenses.
When you have a limitation on 100,000 square feet at the outset, combine that with the fact that the CCC may not have been moving as quickly in the beginning, there was just less product on the market.
Another thing that has happened is a lot of these multi-state operators, or known in the industry as MSOs, were able to enter the Massachusetts market a few years ago, and they relatively quickly were able to max out their cultivation, manufacturing, and dispensary ownership.
But whether it was expected, some would say yes, some would say no, but at a minimum, everyone is thrilled that this new industry has brought such tremendous tax revenue here to the state.EA:There is a discussion about social consumption sites, or cannabis cafes becoming a reality.
And so hopefully this will move forward, and quickly, but it’s difficult to predict the speed with which the legislature may act.EA:Max, our last question for today is, do you see federal legalization in the near term or long term?MB:In my view, when you talk about federal legalization, I would not predict it to occur within the next three years.
There is a possibility that Congress might move forward with the Safe Banking Act in the next year or so, which would really ease the process by which banks would be able to transact in cannabis.
When you continue to see more states coming online each year, the result is that you’re going to see more and more federal legislators that have constituents back home seeking for them to push forward and legalize cannabis.
Eric Altstadter speaks with Nicholas Vita of Columbia Care.
“EisnerAmper” is the brand name under which EisnerAmper LLP and Eisner Advisory Group LLC, independently owned entities, provide professional services in an alternative practice structure in accordance with applicable professional standards.
Eisner Advisory Group LLC and its subsidiary entities are not licensed CPA firms. The entities falling under the EisnerAmper brand are independently owned and are not liable for the services provided by any other entity providing services under the EisnerAmper brand.