Maine lawmakers are considering a plan that would divert tax revenue from cannabis sales to cities and towns to help them cover the impact on municipal services.
If approved, the legislation would require at least 5% of the state’s 15.5% combined taxes on recreational cannabis to local governments that host retail shops and cultivation facilities.
The bill’s primary sponsor, Rep. Tiffany Roberts, D-South Berwick, said it would help alleviate “budgeting uncertainty” for local governments that host retail cannabis operations.
“In the development of Maine’s adult-use marijuana industry, the state has asked municipalities to help balance the newly sanctioned use of this commodity, however, municipalities are not yet seeing a return on their investment,” Roberts said in testimony in support of the bill.
Maine approved recreational marijuana in 2016, allowing adults age 21 and older to possess up to 2.5 ounces of marijuana and it authorizes regulated cultivation and sales. The products are subject to a 10% excise tax and the state’s 5.5% sales tax. In 2021, profits from recreational pot sales in Maine topped more than $81 million, according to state data.
But local governments don’t see any of that money – even if they host a cannabis business – and are forbidden from charging local pot excise fees on the businesses.
John Burke, an attorney who represents cannabis businesses in Maine, said cities and towns are charging “excessive” licensing fees – ranging from $90,000 – for allowing pot shops to open in their communities. He suggested that the slow rollout of the state’s recreational industry is due, in part, to the lack of revenue sharing with local governments.
“Not having revenue sharing is preventing the state from receiving the type of revenue it anticipated from the adult use program, hurting the businesses lawfully operating in the adult use program and frustrating municipalities that were supposed to be partners with the state in administering the program,” Burke said in recent testimony supporting the bill.
He said expanding the number of licensed recreational cannabis shops is essential to the state’s efforts to curb black market sales of the drug.
“Adults who want to use cannabis will use it, whether it’s lawfully through the state regulated programs or unlawfully through the unregulated market,” Burke said.
To be sure, local taxes and so-called “host fees” for cannabis businesses have proven to be controversial in Massachusetts and other states that have legalized medical and recreational use.
Cannabis industry experts say excessive entry fees are stunting the growth of the market by squeezing out smaller companies that can’t afford to pay steep start-up costs.
They point out that the cost of opening a cannabis business is no different than any other retail operation and the cost to local governments is negligible.
Maine is one of 37 states and the District of Columbia that allow medical marijuana sales, but the state doesn’t tax those products.
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