Vermont regulators are asking the state’s nascent cannabis industry to prove it’s worth a place in the market. The request comes as Vermont has yet to launch any legal sales of recreational marijuana, and there is no clear blueprint for how much regulation will cost or what kind of licenses will be offered.
Vermont’s retail cannabis market is set to launch in about a year, in October 2022, and the state’s Cannabis Control Board has already taken several crucial choices that will define the state’s legal marijuana industry.
Mitch Wertlieb of VPR talked with Bob Kinzel, senior political journalist. For clarity, their chat has been trimmed and condensed.
Mitch Wertlieb (Mitch): The board has opted to emphasize small marijuana farmers in one of its early and most crucial decisions, but why are they doing this in particular?
Bob Kinzel (Kinzel): Mitch, they’re acting on the Legislature’s orders, and I believe that’s one of the most critical choices they’ve taken, because it has ramifications on so many facets of this subject.
Let’s start with the definition of a little grower. This is defined by the board as an indoor enterprise of little more than 1,000 square feet.
So, what’s the size of that? Imagine a basketball court the size of a football field, then reduce it in half. Are you on board with me?
So far, I agree with you. We have that much space from half court.
Cut that half court in half again, and you’ll get a quarter of a basketball court. This equates to around 1,000 square feet. Board head James Pepper told me that his first objective is to use only small growers to meet the state’s demand for retail cannabis, which he expects to be about 450,000 square feet.
“Our plan is to start with the lesser license types and see how much of the 450,000 square feet we can fill with modest cultivators,” says the company “Pepper remarked. “We’ll open up those additional levels if we require greater canopy sizes since we’re not close to that amount.”
Another way the board favors small, Vermont-based firms is by allowing several entities to have just one license in each category.
As a result, a single business can only have one expanding permission. That seems to be fairly modest at first. This implies that a single corporation may only hold one retail location; franchisees are not permitted in Vermont.
As a result, a single firm may only be granted one wholesale product license. So far, the board has made it plain that it wants the state’s cannabis market to be dominated by small, Vermont-based companies.
Bob, we know that Vermont’s so-called “underground” market already contains a sizable number of cannabis cultivators. What role do you think they could play in the creation of a legal retail market?
Mitch, for me, this is one of the most intriguing features of this issue. It is estimated that 25% of the adult population in the state smokes cannabis at least once a month. As a result, you’d expect the cannabis board would seek to shut down these farms.
That, however, is not the case. Pepper is attempting to incorporate its producing abilities into the new legal market.
“They’re expanding in the legacy market, or ‘illicit’ market, but they’re some of the greatest,” adds the author “Pepper expresses himself. “And if we offer them with a hospitable regulatory environment that allows them to come out of the shadows and provide some consumer protection and safety requirements, I believe we will be a leader in Vermont and nationally.”
“They’re increasing in the legacy or ‘illicit’ market, but they’re some of the greatest.” And if we offer them with a hospitable regulatory climate that allows them to come out of the shadows and provide some consumer protection and safety requirements, I believe we will be a leader in Vermont and nationally.”
Chair of the Cannabis Control Board, James Pepper
Instead of waiting until next summer, the board aims to award temporary growing permits in the coming months to see how many of these current clandestine farmers are interested in joining the new legal market.
Another important point to note is that supporters of the authorized retail strategy are intending to collect a significant sum of money by taxing marijuana items.
What are your plans for that? Will part of the funds be allocated to certain programs?
There will be a 14 percent state excise tax on all [cannabis] items to begin with, and then a 6 percent state sales tax will be added on top of that. As a result, it will begin with a 20 percent state tax.
Furthermore, local communities with a retail [cannabis] business would be entitled to impose a 1% or 2% local choice tax. As a result, you’re probably looking at a figure of about 22%.
You may be wondering how it stacks up against other states. It’s right in the midst of everything. The state of Washington, for example, has a 37 percent tax rate. The state of California has a 15% tax rate.
I got the opportunity to ask Pepper whether he felt Vermont’s 22% tax rate would encourage some consumers to continue purchasing cannabis on the black market. He declined because he believes out-of-state visitors would make up a substantial portion of Vermont’s new retail sector at first.
“And those are the people who truly want to know what they’re buying, who want to know the cannabinoid profile, who want to know whether a product has been tested, who want to know what they’re buying.” “Pepper said. “They also want to buy it from a shop. They’re willing to pay a premium to visit Vermont, just as they are for our craft beer, maple syrup, and cheese, and they’re prepared to pay a premium for a speciality product.”
Cannabis tax income is expected to bring in between $45 and $50 million a year, according to the board.
All of the state’s 6% sales tax is now allocated to after-school activities, which may amount to nearly $10 million. In addition, 30 percent of the excise tax will be utilized to fund a range of juvenile education and prevention initiatives, which may amount to an additional $10 million.
Act 164, the statute that established the retail sector in Vermont, has some very strong social equality measures in addition to stressing and supporting smaller producers. What was the purpose of it, and how would it work?
When legislators enacted the retail cannabis bill, this was a key objective.
Persons of race and/or people who have “been disadvantaged by the illegality of cannabis” are both eligible for this category, according to the board.
Rep. Maxine Grad, the chairwoman of the House Judiciary Committee, says statistics indicate that persons of color are considerably more likely to be stopped for traffic violations in this state, and were far more likely to be arrested for cannabis possession when it was prohibited in Vermont.
“Well, it’s critical to attempt to rectify and ameliorate the damage inflicted by the war on cannabis on communities of color,” Grad remarked.
“It’s critical to attempt to heal and alleviate the damage inflicted by the war on cannabis on communities of color.”
Vermont House Judiciary Chair Maxine Grad
The board will also remove license costs and make special financing available to these applicants to make it simpler to launch a cannabis firm.
Kyle Harris serves on the [Cannabis Control] Board of Directors. He believes that having access to large loans and scholarships is vital for this category of candidates.
“A $5,000 fee reduction or a $10,000 fee reduction may make or break certain people,” Harris said, “but it will still require a lot of business acumen, the proper resources, and the right support structure to be successful, just like in any industry.”
Mitch, this is just another reason why the board would award temporary permits, allowing applicants to get funding as quickly as possible.
The Cannabis Control Board seems to have a lot of work ahead of them if they are to reach their objective of having marijuana retail businesses up and operational in little over a year. Do you believe they’ll be able to meet the deadline?
Mitch, I believe the answers are yes, no, and perhaps. Do you think that’s everything?
The answer is yes if legislators analyze the board’s conclusions and then approve them.
However, if legislators decide to properly evaluate the board’s important judgments, including changing and debating some of these rules, the answer is very certainly no.
And if legislators don’t prioritize this subject at the start of the session, but then throw it into high gear around Town Meeting Day, the answer will be “maybe.”