The Rhode Island Senate today approved legislation to legalize, tax and regulate cannabis. It is the first time legislation to legalize cannabis for recreational use has reached the floor of either legislative chamber in Rhode Island, marking a major milestone in the decade-plus efforts of the sponsor, Senator Joshua Miller.
At the request of President of the Senate Dominick J. Ruggerio last fall, Senator Miller and Senate Majority Leader Michael J. McCaffrey worked to craft legislation that creates a comprehensive tax and regulatory structure to legalize cannabis.
The bill, 2021-S-568A, creates a Cannabis Control Commission to oversee a competitive and accessible licensing structure that would generate tax revenue through the state sales tax, a special cannabis sales tax, and a local sales tax which is remitted back to the community where the point of sale occurred.
“Cannabis legalization is a monumental shift in public policy that effectively creates a new economy,” said Senator Miller, who also chairs the Senate Committee on Health and Human Services. “We want to ensure as many Rhode Islanders as possible have the opportunity to participate in this new economy. That is why we set low, tiered licensing fees and we are also calling for the creation of a Cannabis Equity Fund to help individuals who have been directly and indirectly impacted by our past policy of prohibition.”
The Commission would be a five-member, full-time board tasked with overseeing the licensing of four aspects of the cannabis supply chain: cultivation, manufacturing, retail, and testing. To prevent monopolization of the new market, no business entity would be allowed to possess more than one license, although an individual can invest in more than one endeavor.
The legislation creates the Cannabis Equity Fund to provide technical and grant assistance to qualified individuals and a fee-free mandatory expungement process for individuals with marijuana related offenses.
“Cannabis legalization is as much about reconciliation as it is revenue,” said Majority Leader McCaffrey. “The Justice Reinvestment prison reform initiative showed that policies of prohibition have disproportionately impacted communities of color, and I believe we must ensure any effort to legalize cannabis recognizes and rectifies those wrongs. Low barriers to entry, expungement reform, and broad access to programs designed to increase access for individuals and communities impacted by the failed War on Drugs are an important and necessary component.”
The legislation legalizes the possession of up to one ounce of marijuana by individuals over the age of 21. It also allows for home grow comparable to neighboring Massachusetts. Cannabis consumption would be prohibited in public places, and unsealed containers would be prohibited from the passenger areas of a car.
In addition to the three percent local sales tax and the state’s regular sales tax, a cannabis sales tax of 10 percent would apply. Licensing fees range from as low as $100 for a small cultivator’s license, to $5,000 for manufacturers and testing entities’ licenses, and up to $20,000 for the largest cultivators and retailers. New cultivators licenses would be available after July 1, 2023.
Once passed, the Cannabis Control Commission would be empowered to establish rules and regulations for the state’s cannabis market and tasked to vet applicants. Retail licenses would be capped at one license per 20,000 residents per municipality, but every community would be eligible for at least three retail licenses. While cities and towns would have the opportunity to opt-out through voter referendum, in doing so they would forgo their opportunity to garner a three percent local tax collected at point of sale. Communities could pass local ordinances to regulate the time, place, and manner of cannabis operators; however, local communities could not impose any additional fees or contingencies.
“We want to provide cities and towns with the ability to opt-out, but we cannot allow an overly burdensome patchwork of regulation throughout our state,” said Leader McCaffrey. “We know from experiences in other states that less parochialism and lower fees leads to greater transparency and a more competitive market. If a community wants to opt-out and forgo tax revenue that is one thing, but we also need to make sure the process is open and transparent.”
“We have worked for many years to develop and improve legislation that implements a cannabis tax and regulatory structure,” said Senator Miller. “Over the years, I have sponsored legislation and led commissions, and we have all learned from the experiences in other states. The approach we are taking is not just about tax revenue. It’s about rectifying past wrongs and opening new opportunities. And it’s about smarter drug policy. Prohibition clearly didn’t work, and is next to impossible with the availability legal cannabis just over the state borders. I’m look forward to continuing to work with my colleagues in government to bring this bill to enactment.”
Added President of the Senate Ruggerio, “Under the status quo, with cannabis readily available, Rhode Island must address all the societal costs, but we have no regulatory framework and no associated revenue stream. The longer we wait to open a cannabis marketplace, the further behind we fall from a competitive standpoint. Senator Josh Miller and Majority Leader Michael McCaffrey have put forth thoughtful legislation that will create a competitive cannabis economy with low barriers to entry. I encourage our partners in government to continue to work with us to bring this needed legislation over the goal line.”
Legalizes cannabis possession under 1 ounce for Rhode Islanders age 21 and up
Allows home grow comparable to neighboring Massachusetts: 6 active plants and up to 12 plants total.
Cannabis consumption prohibited in public places.
Unsealed containers prohibited from passenger areas of a motor vehicle.
Regulatory structure similar to alcohol and overseen by a board of commissioners to be called the Cannabis Control Commission.
Tax structure will include the regular state sales tax (7%), a special state sales tax of 10%, and a local sales tax of 3%. The local tax would be remitted to the municipality where the point of sale occurred.
There will be a process for expunging marijuana related offenses free of charge, whereby individuals file notice with the court for an expedited review of their record. The process is as close to automatic expungement as practical.
Application and licensing fees will fund a “Cannabis Equity Fund,” which will be used to provide technical assistance and grants to applicants from disproportionately impacted areas.
One third of licenses reserved for members of groups who have been disproportionately impacted by past drug prohibition policies.
Four different types of licenses depending on role in supply chain:
o Cultivator License fee of $100 to $20,000, depending on size and type
o Manufacturer License fee of $5,000
o Retail License fee of $20,000
o Testing License fee of $5,000
Entities will be limited to possessing one license to promote equity, competition, and accountability. However, investors can invest in more than one cannabis business.
Communities retain option to opt out.
Participating communities would be limited to one retail license for every 20,000 residents above 30,000 residents, with a minimum of three per municipality.
(This reflects an amendment from the original language, which provide for one retail license for every 10,000 residents above 30,000, with a minimum of 3 per municipality.) As an examples, municipalities of 30,000 or fewer residents would be permitted 3 retail licenses under the revised legislation; a community of 50,000 would therefore be permitted 4 retail licenses under the revised legislation; and a community of 70,000 would be permitted 5 retail licenses under the revised legislation.
Moratorium on Cultivators’ licenses until July 1, 2023
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