NM expected to pay an estimated $15 million in tax refunds to medical cannabis companies

New Mexico cannabis businesses are expected to pay cannabis excise and gross receipts taxes by the end of this month. But the state’s Taxation and Revenue Department is also expected to issue about $15 million dollars worth of gross receipts refunds to medical cannabis companies that paid those taxes prior to the enactment of the […]

NM expected to pay an estimated $15 million in tax refunds to medical cannabis companies

New Mexico cannabis businesses are expected to pay cannabis excise and gross receipts taxes by the end of this month. But the state’s Taxation and Revenue Department is also expected to issue about $15 million dollars worth of gross receipts refunds to medical cannabis companies that paid those taxes prior to the enactment of the Cannabis Regulation Act, which legalized recreational-use cannabis.

State Taxation and Revenue Secretary Stephanie Schardin Clarke told NM Political Report that while the estimated refund amount may sound like a lot of money, it is a fraction of the estimated $31.5 million the state is expected to collect from non-medical cannabis sales. Further, she said, the estimated $15 million in gross receipts refunds is an even smaller fraction of what the state sets aside for reserves.  

In the grand scheme of things, we have something like an $8 billion general fund budget, give or take,” Schardin Clarke said. “So there are other things that happen all the time that are just ups and downs in that revenue base.”

The tax refunds are the culmination of a years-long legal dispute between the Taxation and Revenue Department and Sacred Garden, a long-time medical cannabis producer. In 2014, Sacred Garden unsuccessfully requested a refund of three years worth of gross receipts taxes the company paid. By 2018, Sacred Garden filed an appeal with the New Mexico Court of Appeals. 

A panel of appellate judges ruled in favor of Sacred Garden in 2020 and wrote that a doctor’s recommended use of medical cannabis is essentially the same as a prescription for pharmaceutical drugs. The Taxation and Revenue Department challenged that notion and filed a petition with the New Mexico Supreme Court, arguing that a recommendation by a doctor is not the same as a prescription. New Mexico tax laws allow for some exemptions of gross receipts tax, including the sale of prescription drugs. Earlier this year, the state supreme court dismissed the case, writing that the high court should have never accepted it. 

Since the inception of the state’s medical cannabis law, medical cannabis producers were required to pay a gross receipts tax. But the Cannabis Regulation Act includes a provision that exempts medical cannabis sales from gross receipts taxes, meaning all medical cannabis sales after June 29, 2021, are tax exempt. Non-medical cannabis sales however are subject to both gross receipts taxes as well as a cannabis excise tax. 

Even though more than two dozen cannabis companies may be getting a sizable tax refund, medical cannabis patients who saw a tax line item on their receipts prior to June 2021, should probably not be expecting a refund themselves. 

While most businesses, cannabis or otherwise, pass gross receipts taxes on to their customers, only the business is liable for that tax. Sometimes mistaken for a sales tax, New Mexico’s gross receipts tax is actually a tax on the gross income of a business. 

Schardin Clarke said it can often feel the same to the consumer though.  

“In a traditional sales tax state, the sales tax is actually due from the buyer, but it gets collected and remitted through the business, and so it kind of feels the same,” Schardin Clarke said. “It still shows up on your receipt, and you still pay it at the end of the day. But a gross receipts tax is actually due on the seller, that’s what makes [New Mexico] a little unique.”

Schardin Clarke said it is up to each business to decide how or if they want to pass those refunds back to consumers. 

“I would think logistically, it might be difficult, even if they, out of the goodness of their hearts, wanted to refund this to customers,” Schardin Clarke said. “I don’t know how easy that would be to find those people.”

Now that the legal case is officially closed, Schardin Clarke said her department is “standing ready” to receive requests for refunds from those medical cannabis companies that paid gross receipts taxes prior to June 2021. Technically, she added, those businesses will first have to amend prior tax returns and then request a refund of any amount owed by the state. 

While the state won’t see an accurate amount in tax revenue until later this month at the earliest, the state’s Regulation and Licensing Department and its Cannabis Control Division reported $40 million in combined medical and adult-use sales last month.  

We're ad free

That means that we rely on support from readers like you. Help us keep reporting on the most important New Mexico Stories by donating today.

Related

Lujan Grisham pocket vetoes two bills

Lujan Grisham pocket vetoes two bills

Gov. Michelle Lujan Grisham pocket vetoed two bills the legislature passed this legislative session: one changing the Cybersecurity Act and the other concerning law…
Gov signs bills with some vetoes 

Gov signs bills with some vetoes 

Gov. Michelle Lujan Grisham signed 69 bills that the legislature passed during the 2024 legislative session. These included the General Appropriations Act which contains…
Guv signs state budget

Guv signs state budget

Gov. Michelle Lujan Grisham signed the budget bill for Fiscal Year 2025 and the Capital Outlay spending bill. The FY25 state budget bill passed…
Advocates travel to D.C. to push for additional protections for the Gila River

Advocates travel to D.C. to push for additional protections for the Gila River

New Mexico advocates seeking to have the Gila River designated as a Wild and Scenic River will travel to Washington D.C. this week to…

NM Supreme Court annuls $10,000 penalty in PNM/Avangrid merger case

The New Mexico Supreme Court ruled on Monday that a penalty the New Mexico Public Regulation Commission levied against the state’s largest utility was…
State fines oil company more than $2 million after spill

State fines oil company more than $2 million after spill

The Energy, Minerals and Natural Resources Department fined an oil and gas company operating in the Permian Basin more than $2 million over produced…
Amid new graduation requirements, what do high schoolers want to learn?

Amid new graduation requirements, what do high schoolers want to learn?

By Margaret O’Hara, The Santa Fe New Mexican The main things that bring Brayan Chavez to school every day: Seeing, talking to and engaging with…
Special ed teachers hope lawmakers OK pay raises, admin changes

Special ed teachers hope lawmakers OK pay raises, admin changes

By Margaret O’Hara, The Santa Fe New Mexican Brittany Behenna Griffith has a laundry list of adjectives to describe the ideal special education teacher:…
Lawmakers must find consensus on competing education spending plans

Lawmakers must find consensus on competing education spending plans

By Margaret O’Hara, The Santa Fe New Mexican A challenging task awaits New Mexico lawmakers in the next 30 days: Reconciling three very different…
Lujan Grisham, Biden admin announce $10 million in federal funds for tribes, pueblos

Lujan Grisham, Biden admin announce $10 million in federal funds for tribes, pueblos

Gov. Michelle Lujan Grisham announced Friday $10 million in funding from the federal American Rescue Plan Act was awarded to six tribal nations and…
Proposal to curb executive powers moves to House Judiciary

Proposal to curb executive powers moves to House Judiciary

The House Government, Elections and Indian Affairs Committee discussed a potential constitutional amendment that seeks to limit the governor’s executive powers. The committee approved…
Supreme Court censures attorney over conduct in anti-COVID policy suits

Supreme Court censures attorney over conduct in anti-COVID policy suits

The New Mexico State Supreme Court censured a New Mexico attorney because of her “misconduct” in two unsuccessful cases pushing back on COVID-19 regulations…
Supreme Court to hear two abortion cases this spring

Supreme Court to hear two abortion cases this spring

Later this month, the U.S. Supreme Court will hear oral arguments on the case against the abortion medication mifepristone. It will hear a second…
How Biden, others highlighted reproductive rights at the State of the Union

How Biden, others highlighted reproductive rights at the State of the Union

President Joe Biden highlighted reproductive rights issues as part of his State of the Union speech Thursday. Biden delivered his 2024 State of the…
Stansbury invites OB-GYN doctor as her state of the union guest 

Stansbury invites OB-GYN doctor as her state of the union guest 

U.S. House of Rep. Melanie Stansbury has invited an OB-GYN doctor from Roswell as her guest for President Joe Biden’s State of the Union…
Supreme Court to hear two abortion cases this spring

Supreme Court to hear two abortion cases this spring

Later this month, the U.S. Supreme Court will hear oral arguments on the case against the abortion medication mifepristone. It will hear a second…
How Biden, others highlighted reproductive rights at the State of the Union

How Biden, others highlighted reproductive rights at the State of the Union

President Joe Biden highlighted reproductive rights issues as part of his State of the Union speech Thursday. Biden delivered his 2024 State of the…
Stansbury invites OB-GYN doctor as her state of the union guest 

Stansbury invites OB-GYN doctor as her state of the union guest 

U.S. House of Rep. Melanie Stansbury has invited an OB-GYN doctor from Roswell as her guest for President Joe Biden’s State of the Union…
See who’s going to be on your primary ballot in June

See who’s going to be on your primary ballot in June

Tuesday marked the official beginning of the 2024 New Mexico primary season for the legislature, with candidates officially filing for candidacy. This is the…

Bill to require disclosure of use of AI in campaign materials goes to governor

The Senate approved a bill aiming to require the disclosure of the use of artificial intelligence or other changes made by computers to campaign…
House amends, passes bill banning firearms near polling places

House amends, passes bill banning firearms near polling places

The House narrowly approved a bill that would ban firearms near polling places. The House voted 35-34 to pass the bill following an extensive…
Advocates travel to D.C. to push for additional protections for the Gila River

Advocates travel to D.C. to push for additional protections for the Gila River

New Mexico advocates seeking to have the Gila River designated as a Wild and Scenic River will travel to Washington D.C. this week to…
U.S. Supreme Court lets ban on Couy Griffin from holding office stand

U.S. Supreme Court lets ban on Couy Griffin from holding office stand

The U.S. Supreme Court declined to hear an appeal of a Republican official who was barred from holding office after being convicted for a…
Politics Newsletter: legislative leaders not running for reelection

Politics Newsletter: legislative leaders not running for reelection

Hello fellow political junkies! Candidate filing day has come and gone, and members of House and Senate leadership opted to either not seek reelection…

GET INVOLVED

© 2023 New Mexico Political Report