In January, New Jersey doubled the cannabis Social Equity Excise Fee from roughly $20 a pound to $40 per pound. Now, Governor Phil Murphy wants to increase the tax again - this time by 500% to $240 per pound. This tax is applied to cultivators and not directly at retail locations, but the cost is passed on to consumers.
So what does that mean for dispensaries and medical cannabis patients?
How Recreational Tax Hikes Might Affect Patients
The tax doesn't apply to medical cannabis purchases because medical cannabis is exempt from taxes in New Jersey (all the more reason to get a New Jersey medical marijuana card if you haven't yet).
But a higher recreational cannabis tax rate could affect cannabis availability in the long term. This is because most dispensaries serve recreational customers - either exclusively or in addition to medical. Many of these businesses are already struggling with declining sales and an extremely high federal tax burden under Schedule 280e of the federal tax code.
With such a large price hike, recreational customers may be more likely to purchase less cannabis or even turn to the black market, thus affecting most dispensaries' overall profits. Consumers may also seek lower prices in neighboring states.
Upward price pressure can result in cost cutting efforts, such as offering less product variety, or even closure of some dispensaries as consumers seek cheaper sources.
Medical Cannabis May See a Boost
Medical dispensaries, on the other hand, may see a small boost as the cost of obtaining a medical marijuana card makes more sense in light of the significant tax savings it can offer in New Jersey.
Our latest consumer poll showed that 66% of our respondents are cutting back on cannabis purchases due to inflation. Driving prices higher at a time when consumers are cutting back may backfire on the legal market.
Only time will tell how this ultimately pans out. In the meantime, don't forget to renew your NJ med card before it expires. With each tax hike, it makes more and more sense to get, or keep, those medical cannabis perks.
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The information in this article and any included images or charts are for educational purposes only. This information is neither a substitute for, nor does it replace, professional legal advice or medical advice, diagnosis, or treatment. If you have any concerns or questions about laws, regulations, or your health, you should always consult with an attorney, physician or other licensed professional.
