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.

NM Cannabis regulators lift cease and desist order from producer

A New Mexico cannabis company that was ordered to cease operations at one of its Santa Fe facilities can now resume its operation. 

According to a letter from Cannabis Control Division Director Kristen Thomson to cannabis company Sacred Garden, state regulators lifted a previously issued cease and desist order on April 27.  

“Sacred Garden has remedied, or has initiated appropriate plans to remedy, all violations cited by the CCD related to imminent hazards to public health and to Sacred Garden employees,” Thomson wrote. 

The cease and desist order was issued by the Cannabis Control Division on March 24, after two reported instances of mold found on products from Sacred Garden and division staff reportedly found conditions that would pose a risk to the public at the Santa Fe facility. 

Days after the Cannabis Control Division issued the cease and desist letter to Sacred Garden, the cannabis producer filed a request for an injunction to counter the division’s order. Initially, a Santa Fe state district judge ordered the division to allow Sacred Garden to sell manufactured products, such as extracts and edible products, until the Santa Fe facility was deemed safe to fully reopen. In a subsequent hearing, the judge criticized the Cannabis Control Division for not articulating a clear path to compliance. Sacred Garden’s lawyer accused the division of adding additional requirements to remove the cease and desist order between hearings. 

During the initial hearing, the lawyer for the division said an inspector could go back to the Sacred Garden facility in a week to verify the safety issues had been fixed. But during the next hearing, the division’s attorney said Sacred Garden would need to find an air quality specialist to ensure there were no excessive mold spores in the facility.  

The judge gave the Cannabis Control Division about a week to come up with and complete a testing regime that would produce results by last week.

Growing Forward: Cannabis testing takes center stage

The third episode of Growing Forward’s fourth season is out just in time for April 20, or 4/20, the unofficial holiday for many cannabis users. 

Growing Forward is a collaborative podcast between New Mexico PBS and NM Political Report, all about cannabis in New Mexico. This week, the podcast examines, for a second time, cannabis testing. 

Growing Forward spoke with Barry Dungan, the CEO of cannabis testing lab Rio Grande Analytics last season. But with adult-use sales that started this month, Dungan is preparing for an increase in business and a second location in Las Cruces. 

In addition to a new location and increased business, Dungan will likely soon see a new competitor. TriCore recently confirmed that a new and separate subsidiary had plans on opening a cannabis testing facility in Albuquerque. 

“They’re going to be competition, don’t get me wrong,” Dungan said of the new testing company. “I’m definitely a little worried about that.

NM judge orders cannabis regulators, producer to agree on testing ‘regimen’

A New Mexico cannabis producer asked to halt a majority of its operations by the Cannabis Control Division after reports of mold is still barred from selling its cannabis flower, for at least another week. In a hearing on Wednesday, Santa Fe state district judge Bryan Biedscheid ordered cannabis regulators and cannabis producer Sacred Garden to try and come up with an agreeable way to move forward in the ongoing case by the end of the day on Thursday. 

Biedscheid said he was not going to rule on a motion filed by Sacred Garden asking for an injunction to allow the company to continue selling dried cannabis flower. But Biedscheid did call on the state’s Regulation and Licensing Department and its Cannabis Control Division to actively work with Sacred Garden to come up with an acceptable testing “regimen” that can be completed by next week. 

“The department cannot continue to sit back. And this is the perception of this court, that it is sitting back and waiting for it to be presented, in some fashion, with results it finds satisfactory,” Biedscheid said. “It must take action to see that its concerns are addressed in a way that does not cause unnecessary delay, and other irrevocable harm to the plaintiff.”

The ongoing legal dispute stems from a cease and desist letter the Regulation and Licensing Department sent Sacred Garden just days before legal adult-use sales were to begin in New Mexico.

Gov. Lujan Grisham signs special session relief bill

Gov. Michelle Lujan Grisham signed a bill on Friday that will provide New Mexicans with payments up to $1,000. 

HB 2, which the Legislature passed earlier this week during a special legislative session, uses $698 million to provide $500 to single tax filers and $1,000 to joint filers. The legislation will also use $20 million to provide relief, on a first-come, first-served basis, to those who did not file income taxes.  

“Today I am glad to enact legislation easing the burden of high national prices, putting money in New Mexicans’ pockets and protecting their paychecks,” Lujan Grisham said. 

Lujan Grisham also signed SB 1, which will set aside $50 million for community projects around the state. Referred to as a “junior” spending bill, SB 1 was the second attempt of a bill that the Legislature passed during the 30-day session earlier this year, but that Lujan Grisham pocket vetoed. 

Both bills come on the heels of a bill that the Legislature passed during the 30-day session and the governor signed that will provide up to $1,500 in relief to New Mexico households to counter increased gas prices. 

Conflicting views on when or if NM is headed for a medical cannabis shortage

Cannabis producers in New Mexico have their collective eyes on daily sales numbers to determine what sort of demand there will be moving forward a week after recreational-use sales started. 

The New Mexico Cannabis Control Division reported more than $5.2 million in combined medical and recreational-use cannabis sales and more than 87,000 transactions in the first three days. The division is expected to release more numbers Friday morning. 

In addition to the hype of first-time adult-use sales, the state’s cannabis industry will likely face a spike in sales on April 20, or 4/20, which is usually the biggest day of the year for cannabis sales. While some producers told NM Political Report that they are set for the weeks and months to come, one of the state’s largest cannabis companies predicts the state is headed for a “severe shortage” of cannabis, and soon.  

“I say we’re 20 days out on the low end, about 25 on the high end,” Ultra Health President and CEO Duke Rodriguez said. 

State law defines a cannabis shortage as a situation when supply is “substantially” less than the three month period leading up to the effective date of the Cannabis Control Act. 

But Rodriguez, who has long warned about an impending shortage and has advocated for an unlimited cannabis production limit, said the cannabis shortage he is warning about is different than the statutory definition. Rodriguez said the shortage will likely emerge as limited supplies of certain products or cannabis cultivars. He also said that those types of shortages will impact large businesses like his and trickle down to smaller businesses, who likely can’t weather reduced sales, which will ultimately impact those who rely on cannabis as medicine.

Judge orders state to allow cannabis producer to sell some products after reports of mold

A legal battle has emerged between a New Mexico cannabis business and the agency tasked with regulating cannabis production and sales after state regulators reportedly found mold in some of the company’s products. 

The day before legal adult-use cannabis sales began, cannabis producer Sacred Garden filed a request for a temporary restraining order and preliminary injunction in state court, asking a judge to effectively override a cease and desist order issued by the state’s Cannabis Control Division. 

First Judicial District Court Judge Bryan Biedscheid, during a hearing on Tuesday, ordered the Cannabis Control Division to allow Sacred Garden to sell manufactured products, which both parties agreed would not have been affected by the mold that was reportedly found. 

Biedscheid said on Tuesday that “the appropriate court order” he could issue at the time was to allow Sacred Garden to sell manufactured products that are “thought to be safe by virtue of the process involved.”

Biedscheid also took issue with the reason that regulators had not been back to Sacred Garden’s facility to determine if the reported mold problem had been resolved. Kevin Graham, deputy general counsel for the New Mexico Regulation and Licensing Department, which oversees the Cannabis Control Division, initially told Biedscheid that the division cannot send a qualified inspector to Sacred Garden’s facility until early next week. 

“One of the reasons we said we needed until Monday in order to be able to come back out to the facility was that we have one staff member who’s particularly qualified to assist in that type of examination,” Graham told Biedscheid. “He’s out of town on vacation, which, you know, employees get to take some time off every once in a while.”

Sacred Garden’s attorney, David Foster, told Biedscheid that the facility that the division shut down is key to the company’s operation. Because state regulators froze the company’s access to the state’s tracking software and 95 percent of Sacred Garden’s supply comes from that facility, Foster said, the entire company is at risk of shutting down.    

“They’re about to be out of product to sell, I would say by tomorrow at the latest,” Foster said. 

Biedscheid gave the Cannabis Control Division another day to review an updated independent test from Sacred Garden and said he wanted to balance public safety with the prosperity of the cannabis business.   

“We’ve got two issues here,” Biedscheid said. “One is speed to mitigate any harm to this company, in terms of a determination and an open-ended ‘Well, maybe things will work out when people come back from vacation,’ in the current environment isn’t cutting it.”

Biedscheid gave Graham until Thursday morning to respond to the latest test Sacred Garden commissioned and said he was prepared to schedule another timely hearing if needed. 

“I’m not comfortable saying that I’m going to override the department, and it’s going to go to retail,” Biedscheid said.

Growing Forward: First day of adult-use sales

As expected, many cannabis dispensaries around New Mexico saw lines out the door and one company kicked off the first day of recreational-use cannabis sales at midnight. Customers in New Mexico made more than $5 million in cannabis sales, either medical- or recreational-use, during the first weekend of legal adult-use sales, according to state regulators. 

Growing Forward, the collaborative cannabis podcast between NM Political Report and New Mexico PBS was in the field on opening day to talk with both dispensary operators and new customers about what legalization means to them. 

To mark the occasion, Gov. Michelle Lujan Grisham visited Everest Apothecary in Albuquerque. Lujan Grisham greeted the dozens of people in line and later spoke with reporters about the historical day. 

“This is what New Mexicans said they wanted,” Lujan Grisham told reporters. “They said they wanted it well before I was running.”

The dispensaries that opened their doors to adult-use cannabis customers were largely legacy cannabis producers that have been licensed by the state’s Medical Cannabis Program for nearly a decade or longer. But one newly licensed business, Carver Family Farm, was able to cultivate enough cannabis to open its doors on April 1.   

Andrew Brown, Carver Family Farm’s co-owner and chief cultivation officer, told Growing Forward that his company is doing fine under the state’s requirement that microbusinesses like his have no more than 200 mature plants.

First day of NM legal cannabis sales surpasses $2 million

Friday marked the first day of legal, recreational-use cannabis sales in New Mexico, nearly a year after Gov. Michelle Lujan Grisham signed the Cannabis Regulation Act. 

Lujan Grisham spoke with reporters in Albuquerque at Everest Apothecary, a cannabis dispensary. She said she was “excited” to see New Mexico finally take part in a legal adult-use cannabis industry.  

“Today is like the fruition of a ton of work by a lot of incredible people making sure that New Mexicans have access to recreational adult-use cannabis in exactly the way they want and it’s a huge economic opportunity for the state and I’m feeling terrific,” Lujan Grisham said. Lujan Grisham told reporters on Friday that she estimates the state could see about $50 million in cannabis tax revenue in a year.  

Victor Reyes, the deputy superintendent of the New Mexico Regulation and Licensing Department, which oversees the Cannabis Control Division, praised the department’s staff for preparing for recreational-use sales in about 10 months.  

“We stood up a brand new industry for our state in less than a year,” Reyes told NM Political Report. “That is something that other states couldn’t even think about doing, and we did it because we knew that it was important from our values perspective, to make sure that recreational cannabis was legalized and done so quickly.”

According to The Cannabis Control Division, total sales on Friday surpassed the $2 million mark as of 5 p.m. 

While the Cannabis Regulation Act limits some restrictions from municipalities and counties, local governments can and have passed ordinances specifying allowable operating hours for cannabis retail businesses. In Santa Fe, for example, dispensaries were allowed to open as early as 7 a.m. and cannabis retailers could open their doors at 10 a.m., but one southern New Mexico city saw legal cannabis sales start just after midnight.

Some Southern NM cannabis producers face conundrum with testing facility locations

Cannabis companies around the state are preparing their storefronts and bolstering their crops for the start of recreational-use cannabis sales, which will start on Friday. And while a majority of storefronts are expected to be in the Albuquerque and Santa Fe metro areas, some businesses in the southern part of the state might get held up in an important process of preparing cannabis for sales: testing. 

State law requires that the New Mexico Regulation and Licensing Department develop testing standards for commercially sold cannabis. The department’s Cannabis Control Division developed rules and regulations that require all cannabis being sold go through a series of tests that look for things like fungus, pesticides and to verify the potency level. 

But for cannabis growers in Las Cruces, it’s nearly impossible to transport cannabis products to a testing facility without the risk of federal agents seizing those products and, in some cases, any cash that is found. There are currently only two state-approved cannabis testing labs in New Mexico. One is in Albuquerque and the other is in Santa Fe.