Recommendations for Possible Taxing and Regulating of Adult- Use Marijuana in Vermont as Adopted by the Governor’s Advisory Commission on Marijuana Governor’s Marijuana Advisory Commission Submitted by Co-Chairs, Governor’s Marijuana Advisory Commission Montpelier, Vermont December 2018 TABLE OF CONTENTS Subcommittee on Taxation and Regulation.................................................................................... 5 Purpose of Report ..................................................................................................................................... 5 Subcommittee Role................................................................................................................................... 5 Subcommittee Membership ...................................................................................................................... 5 Executive Summary........................................................................................................................ 6 Revenue and Budget ....................................................................................................................... 8 Proposed Tax Structure............................................................................................................................. 8 Other States’ Cannabis Tax Structures ..................................................................................................................8 20% Cannabis Excise Tax....................................................................................................................................12 6% State Sales and Use Tax.................................................................................................................................13 1% Local Option Tax...........................................................................................................................................14 9% Meals and Rooms Tax ...................................................................................................................................14 Income Tax Deduction for Business-Related Expenses ......................................................................................14 Market and Revenue Considerations ...................................................................................................... 15 Revenue Estimate Overview................................................................................................................... 16 Sales and Revenue Estimates.................................................................................................................. 16 Brief Overview of Other States’ Markets ............................................................................................... 18 Allocation and Proposed Budgets........................................................................................................... 20 Agency of Agriculture, Food and Markets ..........................................................................................................21 Department of Taxes............................................................................................................................................24 Department of Health - Subcommittee on Education and Prevention.................................................................25 Department of Public Safety................................................................................................................................26 Vermont Marijuana Registry ...............................................................................................................................26 Department of Liquor and Lottery.......................................................................................................................27 Seed-to-Sale Tracking System.............................................................................................................................27 Municipalities: Revenue Allocation and Local Taxing Authority.......................................................................27 Aggregated Revenues and Budgets......................................................................................................................28 Self-Funded Regulatory Model............................................................................................................... 29 Control Model............................................................................................................................... 32 Federal Preemption ..............................................................................................................................................32 State Regulation; Private Businesses ...................................................................................................................33 Creation of Board of Control .................................................................................................................. 33 Diversion Prevention .................................................................................................................... 35 Prohibition on Gifting Cannabis for a Fee.............................................................................................. 35 Residential Delivery................................................................................................................................ 35 Seed-to-Sale Tracking............................................................................................................................. 36 Licensing....................................................................................................................................... 36 Licensing Overview ................................................................................................................................ 36 Licensing Requirements.......................................................................................................................... 37 Vertical Integration Permitted..............................................................................................................................37 Number of Licenses .............................................................................................................................................38 Background Checks Required..............................................................................................................................38 Preference for Vermont Residency......................................................................................................................38 Information Reporting and Sharing .....................................................................................................................39 License Types ......................................................................................................................................... 39 Cultivator .............................................................................................................................................................40 Processer ..............................................................................................................................................................40 Retailer.................................................................................................................................................................41 Transporter...........................................................................................................................................................41 Testing by Laboratories and Other Research.......................................................................................................42 Setting Fees............................................................................................................................................. 42 Other States’ License Structure and Fees ............................................................................................................42 Consumer Protection and Forms of Use....................................................................................... 43 Advertising Restrictions.......................................................................................................................... 43 Ads may not be enticing to minors ......................................................................................................................43 Ads may not promote excessive use ....................................................................................................................43 Ads may not promote illegal activity...................................................................................................................44 Ads may not contain deceptive, false, or misleading statements.........................................................................44 Prohibited modes of advertising ..........................................................................................................................44 Edibles..................................................................................................................................................... 44 Packaging and Labeling.......................................................................................................................................44 Potency and Dosage.............................................................................................................................................44