NM sees highest month in cannabis sales, collective $10 million in tax revenue

New Mexico has collected, or is due to collect, nearly $10 million dollars from cannabis taxes, according to the state’s Regulation and Licensing and Taxation and Revenue departments. 

According to the latest announcement from the Regulation and Licensing Department, July marked the highest sales so far with more than $40 million in combined medical-use and adult-use sales. 

According to numbers provided by Regulation and Licensing, since recreational-use sales started in April, New Mexico has seen a total of about $196 million worth of cannabis sales. About $112 million was for adult-use sales which are taxed by both gross receipts and cannabis excise taxes. The total amount of sales since April, multiplied by the 12 percent cannabis excise tax signals more than $10.5 million in tax revenue, not counting gross receipts taxes on cannabis and related accessories retails might sell. But according to numbers reported by the Taxation and Revenue Department, the state is due about $9.9 million in cannabis excise tax revenue. 

Charlie Moore, a spokesperson for the tax department, told NM Political Report that the difference in numbers is likely due to not all businesses filing taxes on time. 

“The excise tax numbers we provide are a snapshot in time – it’s how much has been reported to us as of the date we run the query,” Moore said. “Though the deadline to report is the 25th of the month, some businesses may be reporting late.” 

The difference between what the tax department has reported and the calculation based on what the Regulation and Licensing has reported is nearly $700,000. Still, accounting for just the cannabis excise tax, the state is a little less than halfway to the $22 million Taxation and Revenue Secretary Stephanie Schardin Clarke projected the state will see by the end of the fiscal year.

NM cannabis company, medical cannabis patients sue health care providers

The New Mexico Legislature last year approved a bill aimed at eliminating out-of-pocket costs for behavioral health. When Gov. Michelle Lujan Grisham signed the measure into law, she said in a press release that the bill could “make a real, meaningful difference” by eliminating copays for behavioral health services. 

Now, a class action lawsuit filed last week is challenging New Mexico medical insurance providers for not covering medical cannabis expenses. New Mexico cannabis producer Ultra Health, along with six medical cannabis patients, filed the suit against seven New Mexico medical insurance providers and are seeking unspecified damages, reimbursement for their respective cannabis purchases going back to January of this year and for medical cannabis to be covered by medical insurance providers going forward. The case seems to be the first of its kind in the nation. 

The cannabis company and medical cannabis patients are being represented by Christopher Saucedo, who is also a New Mexico State University regent and served last year on the state’s redistricting committee. Ultra Health has established a reputation for filing numerous suits against state departments on various cannabis issues like increasing medical cannabis production limits and overturning medical cannabis rules and regulations.

NM misses deadline for cannabis training standards

When the state Legislature debated the New Mexico Cannabis Regulation Act, many lawmakers raised concerns about the health and safety of the public in a post-legalization world. Some expressed concerns about ingesting too much cannabis, while others raised concerns about intoxicated driving in a state that already battles with some of the worst rates of alcohol-related deaths in the nation. 

In theory, state agencies can require education programs for those who work in the cannabis industry in order to help ensure the public’s safety. And the Cannabis Regulation Act lays out a framework for education standards within the state’s cannabis industry. But currently, there are no rules or regulations for cannabis servers working at consumption lounges that are designed for on-site cannabis consumption and one cannabis educator said she thinks the state is increasing the liability of some business owners. 

The Cannabis Regulation Act includes benchmarks for what is referred to as a “cannabis server education program curriculum.” Some of those standards include subjects like how cannabis interacts with other substances like alcohol and illegal drugs, how to spot “problem cannabis product users” and the impact cannabis has on a person’s ability to drive safely. The law also requires that any cannabis server education program be approved by state regulators. 

But according to the state’s Regulation and Licensing Department and its Cannabis Control Division, there are no specific standards in place beyond what’s in the statute, even though regulators have already begun accepting applications for cannabis consumption lounges and have licensed one company to sell cannabis for on-site consumption. Further, the Cannabis Regulation Act requires that the Cannabis Control Division “begin licensing cannabis training and education programs no later than January 1,2022.”

Growing Forward: Risk and Reward

Companies that are venturing into the New Mexico cannabis industry are likely learning how difficult it can be to secure capital, buildings and insurance. 

Growing Forward, the collaborative podcast between NM Political Report and New Mexico PBS, explored those topics in its latest episode. 

In late May, New Mexico’s chapter of NAIOP, a commercial real estate development association, held a panel in Albuquerque on best practices for cannabis entrepreneurs and property owners who are thinking about leasing space to cannabis companies. 

Shannon Cox, who is in charge of compliance at Southwest Capital Bank, told the crowd that the bank is now wading into the waters of commercial loans for cannabis companies. But, she warned, cannabis business owners should not try to hide the nature of their business from their bank, especially if the bank is not accepting cannabis customers. 

“Don’t lie to your banker, because they’re going to find out and they’re going to kick you out,” Cox said. 

Cox later told Growing Forward that Southwest Capital has been working towards cannabis business loans for some time, but wanted to make sure the bank was compliant before accepting applications. 

“We wanted to make sure that our compliance program was top grade before we started offering new services,” Cox told Growing Forward. “We feel that we’ve got a good program now. We’ve got a very experienced lending staff, which is critical, and we feel that we’re ready to go forward on it.”

In a previous episode, Growing Forward heard from business owners who not only had a hard time funding their business, but also securing a personal mortgage for their home. But Trishelle Kirk, the CEO of Everest Cannabis Co., said she and some of her employees were successfully able to secure mortgages, but that it’s not easy. 

“It’s one of the really frustrating things about being a cannabis employee,” Kirk said.

NM collects $2.4 million in cannabis taxes for first month of sales

The New Mexico Taxation and Revenue Department announced on Friday that it has collected more than $2.4 million in cannabis excise taxes for April, which was the first month of adult-use sales in the state. 

The Cannabis Regulation Act, which was approved by the New Mexico Legislature and Gov. Michelle Lujan Grisham last year, mandates that a 12 percent cannabis excise tax be applied to all adult-use cannabis sales. That 12 percent rate is slated to increase over the next several years. 

Adult-use cannabis sales are also subject to a state gross receipts tax which is seven to eight percent, depending on the county.  The Taxation and Revenue Department reported collecting more than $1.6 million in gross receipts taxes from adult-use cannabis sales.  

Taxation and Revenue Secretary Stephanie Schardin Clarke said in a statement on Friday that the tax revenue so far signals a boost in state revenue. 

“The adult use cannabis industry in New Mexico clearly has gotten off to a strong start,” Schardin Clarke said. “These receipts show the industry is already diversifying our economy and our tax base.”

Adult-use cannabis retail stores paid $2,422,678 in Cannabis Excise Tax from the first month of recreational cannabis sales in New Mexico this April. 

According to the department, 114 businesses filed tax returns and 158 businesses have registered for cannabis tax accounts, but not all of them started sales by April. 

Earlier this month, Schardin Clarke told NM Political Report that the department expects to collect about $31.5 million in cannabis taxes this year. 

Both cannabis excise and gross receipts taxes were due earlier this week, but some businesses said they were caught off guard by the department’s take on how both the cannabis excise and gross receipts taxes are applied to their total sales.     

The Cannabis Regualtion Act also exempts medical cannabis sales from any taxes. 

Adult-use cannabis businesses are required to file their cannabis excise and gross receipts taxes monthly. Taxes on May sales will be due at the end of June.    

Some NM cannabis producers may face higher than expected tax bill

New Mexico recreational-use cannabis companies, for the first time, are required to file their gross receipts and cannabis excise taxes in one week. It’s unclear exactly how much the state is set to collect, but cannabis regulators reported more than $20 million in recreational-use sales for the month of April. 

Since an announcement from the New Mexico Taxation and Revenue Department earlier this month, though, it seems that most if not all recreational-use cannabis companies may have under-collected taxes from customers compared to what those companies will owe. For some companies that could mean cutting costs on things like packaging and raising prices. For at least one company, it will mean a formal appeal with the state. 

On May 5, the state’s Taxation and Revenue Department issued a press release with specifications on how the newly established cannabis excise tax will be calculated with state gross receipts taxes. The guidance from the department was to apply the 12 percent cannabis excise tax to total sales before figuring in the roughly 7 to 8 percent gross receipts tax.

Recreational-use cannabis sales start at 12 am in Las Cruces

Amid music, balloons, cheering and a final countdown on the clock, Jeremy Sandoval became the first person in New Mexico to buy legal recreational-use cannabis just a few minutes after 12 a.m. Friday in Las Cruces. Sandoval, who lives in Las Cruces, said he arrived at the R. Greenleaf Organics store near the Mesilla Valley Mall at 6 p.m. He was the first person to show up. “I’m just excited,” he said. “It’s a milestone. It’s something we’ve all been waiting for.”

When Sandoval walked into the store, he was greeted by a frenzy of local press and Justin Dye, chairman and chief executive officer for Schwazze, which owns R. Greenleaf.

NM signs intergovernmental cannabis agreements with two pueblos

Gov. Michelle Lujan Grisham announced on Friday “historic” intergovernmental agreements with two pueblos that will allow the sovereign nations to take part in the state’s newly established recreational-use cannabis industry. 

According to the governor’s office announcement, leaders of the Picuris and Pojoaque pueblos each signed an agreement with the state that will “support the pueblos taking part in the recreational cannabis industry, driving economic development and setting guidelines for the safe production and sale of cannabis while preventing federal enforcement on their tribal lands.”

While the use, possession and home-cultivation of adult-use cannabis became legal last year and sales are slated to begin next week, cannabis is still illegal on the federal level. But the Cannabis Regulation Act, which is the law that legalized recreational-use cannabis, includes a provision that allows the state and tribal governments to enter into agreements like the ones announced on Friday. According to the announcement, the agreements between the state and the two sovereign governments are different from those in other states like Nevada. 

“These agreements not only formalize pro-tribal policies, such as a state duty to consult and incorporate tribal concepts and policies related to cannabis, but also are the only [intergovernmental agreements] in the nation that provide for ongoing meetings and consultations between state and tribe,” the announcement read. 

The Picuris Pueblo had previously tried to set up its own medical cannabis program after New Mexico legalized medical cannabis use, but the federal government shut the program down. Since then, there have been a few unsuccessful attempts by state lawmakers to pass a law allowing tribal governments to start their own medical cannabis program. Picuris Governor Craig Quanchello, through the governor’s office announcement, praised the agreement for respecting the Pueblo’s sovereignty, while also allowing collaboration between the two governments.

Growing Forward launches fourth season

Growing Forward, the collaborative cannabis podcast between NM Political Report and New Mexico PBS, launched its fourth season on Tuesday. 

With the first legal adult-use sales slated to begin on April 1, Growing Forward checked in with Kristen Thomson, the state’s Cannabis Control Division director, about a failed cannabis bill and what it means for the state’s cannabis industry.  

SB 100 would have increased production limits for smaller cannabis companies as well as allowed those businesses to sell products grown by larger production companies. The bill also aimed to clean up language in the Cannabis Regulation Act to allow legacy cannabis producers to switch their tax status from non-profit to for-profit. Up until last year, the state’s Department of Health, which oversees the Medical Cannabis Program, required medical cannabis producers to register as non-profit companies. “It’s certainly unfortunate that the statute was not amended during the session, but the Cannabis Control Division remains as committed as we ever have been in supporting small local entrepreneurs starting out in the industry,” Thomson said. 

But as far as businesses switching their status, Thomson said they will have to wait until the next legislative session to possibly get that chance. 

At the end of this year’s 30-day legislative session, one cannabis microbusiness told NM Political Report that there was an incentive to switch license types in order to grow more cannabis. Thomson told Growing Forward that the division plans on working out a way for those microbusinesses to change their business classification without having to go through the entire licensing process again. 

“The intent is not to make anybody go through the whole application process again,” Thomson said. 

But, she added, the Cannabis Control Division has to ensure the process is done in a way that can be tracked for auditing purposes.      

Part of the impetus of SB 100 was to create parity between larger producers with production limits regulated by rules and regulations and microbusinesses with production limits written into law.

NM Supreme Court tosses cannabis tax case

The New Mexico Supreme Court effectively ended a years-long legal battle over medical cannabis and taxes. 

In an order filed on Wednesday morning, the court wrote that a previous decision from the New Mexico Court of Appeals that medical cannabis was exempt from gross receipts taxes prior to June 2021 should be upheld. 

“Having considered the petition, response, and briefs of the parties, the judgment of the Court is that the writ shall be quashed as improvidently granted,” the court wrote. 

In other words, the high court should have never accepted the case. 

The lawyer for Sacred Garden, the medical cannabis company that sparked the legal battle, did not respond to a request for comment. 

Duke Rodriguez, whose cannabis company Ultra Health joined the case last year, told NM Political Report on Wednesday that he was “thrilled” with the high court’s decision. 

“I think it’s a recognition that the state never had the legal authority to collect gross receipts tax on the sale of [medical] cannabis,” Rodriguez said. “This finally rights that wrong.”

The issue of gross receipts tax, which is often incorrectly referred to as a sales tax, and cannabis goes back several years, and spans two gubernatorial administrations, when medical cannabis producer Sacred Garden requested a refund for the gross receipts taxes it paid to the state. Sacred Garden’s reasoning was that medical cannabis was essentially the equivalent to other prescription drugs, which are exempt from gross receipts tax. Through an administrative hearing, the state’s Taxation and Revenue Department, under then-Gov. Susana Martinez, denied the request. Sacred Garden took the issue to the New Mexico Court of Appeals, which ultimately ruled that a recommendation for medical cannabis by a qualified medical professional was the same as a prescription for other types of medication. 

In early 2020, the department, which was by then under current Gov. Michelle Lujan Grisham, challenged the court of appeals decision and filed a petition with the state supreme court.