Cannabis Business Licensing in New Jersey

Program Details

Type of Program

• Medical
• Adult-use

Regulatory Agency

• Cannabis Regulatory Commission (CRC)
• Formerly regulated by the New Jersey Department of Health - Division of Medicinal Marijuana

Market Population

• 8.9 million

Market Metrics

• Estimated Adult-Use Sales Year 1: $773 million 
• Estimated Adult-Use Sales Year 4: $1.8 billion 
• Number of License Cannabis Operators: 12
• Number of Registered Medical Patients: 85,000 as of September 2020.
• Medical Tax Rates:
• Medical marijuana taxes are in the process of being phased out in New Jersey. They are currently 4% of sales until June 30, 2021, 2% from July 1, 2021 - June 30, 2022, and 0% after July 1, 2022. 
• Adult-Use Tax Rates:
• First, there's an enhanced state sales tax of 7%.
• The second tax is the social justice excise fee, which will fluctuate between $10 and $60 depending on the average price of cannabis. Per the laws, 100% of this revenue will go toward impact zones. Social Justice Excise Fee varies on average price: 
• $10 tax ($350+) 
• $30 tax ($250 - $349)           
• $40 tax ($200 - $249)         
• $60 tax ($199 or less)
• The third tax is an optional 2% sales tax which municipalities can levy on any marijuana business within its borders.
  

History of the Market

• 2010 - Medical Cannabis Legalization
• Outgoing Governor Jon Corzine signed S.119, the Compassionate Use Medical Marijuana Act, into law on his last day in office. 
• The original law included a limited list of qualifying conditions that did not include chronic pain or Post-Traumatic Stress Disorder (PTSD). 
• The law mandated that all medical cannabis be produced and distributed by licensed Alternative Treatment Centers (ATCs).
• Designated caregivers that cleared a criminal background check are allowed to collect marijuana on behalf of a patient. 
• 2016 - PTSD Added to List of Qualifying Conditions
• 2017 - Chronic Pain and Other Conditions Added to the List
• 2019
• Compassionate Use Medical Cannabis Act Signed into Law
• Created the Cannabis Regulatory Commission
• Improved access to medical cannabis by reducing the number of required annual doctor visits, increased one-time purchase limits, authorized nursing homes, and hospice centers to obtain cannabis for patients, and allowed out-of-state patients to access medical cannabis. 
• Phased out the state sales tax on medical cannabis purchases. 
• New Medical ATC Request for Application Process
• A total of 196 applications were submitted. 
• This process intended to license as many as 24 new medical marijuana businesses. 
• Approximately nine of the disqualified entities filed a challenge to the disqualification. 
• A lawsuit that alleged the system had technical glitches put the award of these licenses on hold for over a year. 
• On February 18, 2021, an appeals court lifted a 2019 order that halted the state from issuing any more licenses to medical marijuana dispensaries.
• 2020 - Adult-Use Cannabis Passed by Voters
• New Jersey Public Question 1, an amendment to the state constitution to legalize the possession and use of marijuana for persons age 21 and older and legalize the cultivation, processing, and sale of retail marijuana, passed with 67% of the vote. 
• 2021 
• On February 22, 2021, Governor Phil Murphy signed the implementation bill to get the adult-use program off the ground.

Licensing  

• Grower, Processor, Wholesaler, Distributor, Retailer, and Delivery licenses will be made available once rules are adopted. 
• During the 18 months, restrictions against vertical integration will be in place to prevent the formation of premature monopolies. Among them, businesses will not be awarded licenses for both growing and distributing cannabis. 
• Marijuana grower licenses will be limited to 37 during the first two years of legal sales. This limit does not apply to micro licenses with ten or fewer employees and 2,500 square feet of canopy space.
• The 12 licensed medical marijuana operators would be permitted to get an adult-use license. Some would get licenses to cultivate, process, and sell; others would get wholesale/distributor licenses. The process is more complicated for the potential, yet-to-be-issued 24 additional MMJ licenses.
• Social Equity
• There is a social equity program as part of the bill. 
• An office within the CRC will be created to ensure social equity.
• The CRC would determine the maximum number of licenses for each class based on market demand.
• 30% of licenses must be allocated to businesses owned by women, minorities, or disabled veterans. 
• Priority would be given based on “impact zones,” or municipalities negatively impacted by unemployment, poverty, or past marijuana enforcement activity. To the extent possible, the CRC would grant at least 25% of the total licenses to such applicants or those who employ at least 25% of their employees from such zones.
• Other priority factors would include residents of at least five years who hold at least a 5% investment interest in an entity.
• A municipality would have 180 days from the bill’s enactment to prohibit adult-use operations but wouldn’t be able to ban delivery services to consumers in the area.

How to Get Started

• Review the language in New Jersey Public Question 1, Marijuana Legalization Amendment and the implementation bills S. 21. 
• Find ideal locations that are currently zoned for medical ATCs. Note that municipalities may ban cannabis businesses but they must enact the new bans within the next 180 days specifically for adult-use cannabis.   
• Develop preliminary plans reflective of the early medical cannabis license applications, which include:
• Security plan
• Environmental impact plan
• Quality control and quality assurance plan
• Background of principals, board members, and owners
• Financing plan
• Community engagement plan
• Research contributions
• Cultivation plan
• Manufacturing plan
• Dispensary plan
• Labor Peace Agreement
• Labor compliance plan
• Minority-owned, women-owned, or veteran-owned business certification
• Workforce and job-creation plan
• Form a strong team with both cannabis and outside-industry experience.

Additional Resources

• New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act, the implementation bill. 
• New Jersey Public Question 1 Marijuana Legalization