Gentry Locke Consulting recently hosted a webinar to discuss one of the hottest topics in Virginia right now: the legalization of cannabis. To learn more about the webinar and to view the slides, click here.
With approximately 500 attendees and over 50 questions, the scale and scope of this industry was obvious. But there were a few key themes and frequently asked questions that emerged.
The Cost of Doing Business
Among the Virginia Cannabis Control Authority’s (the Authority) numerous duties is the determination of license fees associated with the cannabis industry. The only additional fees mentioned in the legislation are a 21% state sales tax for retail cannabis sales and an optional 3% local tax for retail marijuana sales in the locality.
However, there are additional local taxes that interested parties should be aware of including food and beverage taxes, real estate taxes, property taxes, machinery and tools tax, and Merchant’s Capital tax. Before applying, license applicants should learn and understand each locality’s tax structure and how it may impact them. We are happy to help.
Ensuring Social Equity & Diversity
The legislation focuses on diversity, equity, and inclusion in several different ways, including the establishment of a Cannabis Social Equity Liaison, a Cannabis Business Equity and Diversity Support Team, a Cannabis Equity Reinvestment Board and Fund, and a preference for social equity applicants in the licensure process.
Social equity applicants must be a resident of Virginia for at least one year with at least 66% ownership of the business and must fit at least one of the following criteria:
- Have been convicted or adjudicated for any misdemeanor violation that relates to cannabis.
- Have an immediate family member that has been convicted or adjudicated for any misdemeanor violation that relates to cannabis.
- Be a resident for at least three years in an area that is “disproportionately policed” for marijuana crimes or “economically distressed.”
- Be a graduate of a Virginia-based Historically Black College or University (HBCU).
The Authority still has discretion to determine the application process and fees for social equity applications, as well as more clearly defining terms like “economically distressed” or “disproportionately policed.” We expect to see more clarification on license requirements by July 1, 2022, but there’s no telling if the General Assembly will expedite the timeline.
It’s important for those interested in applying as a social equity applicant or on any of the equity-focused positions to continue to monitor and get involved in the regulatory process to ensure that the final regulations include a place for them. Contact a regulatory professional like us today to assist.
Cannabis & the Workplace
We received many questions about how legalization will affect pre-employment drug screenings, CDL licenses, workers’ compensation claims, and drug-free workplace mandates.
Under legislation passed in 2020, arrests related to marijuana are sealed from private employers and educational institutions, and therefore applicants are not required to disclose information concerning a marijuana-related arrest; however, the legislation allows for the dissemination of such records in instances where federal law requires employers to inquire about prior criminal charges or convictions. There are also several state-run entities that require the disclosure of prior cannabis charges or convictions.
It’s very likely the law will change regarding cannabis and the workplace, so when the changes do come, it’s important to have the right legal team on your side. Gentry Locke Attorneys’ Employment & Labor Law Practice Group can keep your business ahead of the curve.
According to the legislation, localities have the power to influence cannabis sales in their jurisdiction. As previously mentioned, localities can apply an optional 3% tax to cannabis sales in their locality. Additionally, localities can adopt zoning, land use, and business license requirements; govern retail cannabis store operating hours; and petition the circuit court to place a referendum on the ballot that can potentially ban retail marijuana stores in the jurisdiction for at least four years.
Those interested in the cannabis business need legal experts with good relationships with localities who can advocate for them and help navigate issues such as zoning and land use requirements.
Financial Institutions’ Responsibility
There is a place for financial institutions in Virginia’s new cannabis industry. The legislation gives banks and credit unions the ability to assist licensed establishments with no penalty, and the Authority will select a community development financial institution to help provide loans for qualified social equity cannabis licenses.
For those interested in ancillary financial services, contact us so that we can give you advice on ways to ensure compliance with the latest laws regarding this industry and how the legislation will impact how you do business.
Although there is a desire for diversity within the industry and a preference against people holding multiple licenses, there are opportunities for people to hold multiple licenses, including licenses in a variety of categories. The way to go about this is complex and requires the right business structure, so it’s best to speak with a legal and regulatory professional who knows the legislation well enough to provide legal advice on how to obtain multiple licenses.
Out-of-State Investors & Products
The provision states that the Authority has discretion to deny licenses to non-residents of the Commonwealth. Although they can deny licenses to out-of-state residents, out-of-state residents may be able to still work in the cannabis industry. The law is clear however that no marijuana or marijuana products from other states shall be brought into, marketed, or advertised in Virginia.
It’s best to discuss this with a professional who understands the process and can provide all the options for non-residents to be a part of what’s happening here in Virginia.
We Can Help You
Gentry Locke Consulting is here to help you with all your needs in this industry. Our legal, legislative, regulatory, and business professionals have the experience to guide you through the cannabis industry with confidence. For more information, contact us at www.gentrylocke.consulting/cannabis.