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March 10, 2022 | Posted in:

From Seed to Sale: The Growing NJ Market for Cannabis

New Jersey’s legalization of recreational marijuana in November 2020 has investors and growers seeing green. Experts predict that sales for legal weed could grow to $1.6 billion by 2025. That doesn’t include other uses of the plant, such as hemp and oils. Also promising are the many industries that will reap the benefits of the ‘Green Rush’—from testing labs to warehouses, transportation and packaging companies to retailers and professional services firms.

 

Update: On Thursday, March 24, 2022, a state commission delayed approving the expansion of eight medical marijuana dispensaries to start selling recreational weed in New Jersey to as late as the end of April. CRC Executive Director Jeff Brown said that the commission wants plans for how they can accommodate both medical marijuana patients and those seeking to buy recreational cannabis. Brown says the center do not currently have enough weed, hinting the market may be short by 100,000 pounds to meet both medical and recreational groups.

The Cannabis Regulatory Commission that oversees the nascent industry did approve 68 cultivators and manufacturers for conditional licenses. However, those operations are not expected to launch until the fall at the earliest.

 

While the cannabis industry is certain to create jobs and spawn a multitude of business opportunities, the industry is extremely nuanced and constantly changing. Aligning with experts is a must.

 

Governing Laws

When it comes to regulation, the complexities start with the difference between federal and state governments. Because cannabis is not federally legalized, FDIC-insured banks cannot be involved. Financing must come from state and locally chartered banks, venture capital and private investments.

 

Those interested in the industry also need to be aware of local regulations. Over 70% of New Jersey towns have banned all types of cannabis businesses, and only 98 will allow legal weed dispensaries.

 

Taxes and Business Structure for Cannabis Businesses

Taxes and audits can be particularly severe for cannabis businesses. For example, IRS Section 280 prohibits them from deducting business expenses from federal taxes. It is also important for new cannabis businesses to choose the right structure. The differences impact the ease of start-up, financing, owner protection and reporting requirements.

 

Legal Cannabis in New Jersey: A Garden State Update

New Jersey has learned important lessons from other states that have already legalized marijuana. Some states licensed businesses up and down the supply chain at the same time, creating a retail industry before the product was ready. Here, the NJ Cannabis Regulatory Commission is licensing growers, manufacturers and testing laboratories first.

 

Applications for these businesses opened on December 19th and nearly 500 were received in the first four hours. The state is only issuing 37 licenses for cannabis growers before 2023 and priority is being given to veterans, women-owned and minority-owned businesses. Prospective marijuana dispensary owners can apply starting on March 15, 2022.*

 

Alloy Silverstein’s Cannabis Business Experts

We have a dedicated cannabis team with its pulse on the industry, and knowledge and connections needed to advise those who are interested. We are training extensively and we are members of Cheryl’s Lists, a network of cannabis experts from scientists to attorneys to investors. Look for updates on our website and announcements about webinars, classes and more.

 

Our cannabis tax and advisory team is ready and able to partner with you this Spring. Contact Alloy Silverstein for guidance on your specific situation.

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