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Pennsylvania Proposed Municipal Taxes

Pennsylvania Governor Josh Shapiro proposed legalizing adult-use marijuana during his recent budget address, suggesting it could generate approximately $255 million in new tax revenue for the state. Drawing on the experiences of other states, it’s anticipated that local municipalities would also benefit from taxes imposed on cannabis sales.

According to Steven M. Schain, senior counsel at Smart Counsel LLC, a law practice specializing in cannabis issues, about a dozen states, including New Jersey, New York, and Oregon, permit local municipalities to impose taxes ranging from 2% to 5% on legal pot sales. Weight and potency are other factors that municipalities consider in taxing marijuana.

Shapiro’s plan includes a 20% tax on the wholesale price of cannabis products, with projected allocations for restorative justice, agricultural operations, law enforcement, and administration. The remaining revenue would contribute to the state’s general fund.

The specifics of how legalization would be implemented, including municipal taxation and the possibility of municipalities prohibiting cannabis stores, will be determined by the General Assembly. However, there’s a push for municipalities to receive a portion of the state tax on sales rather than devising their own taxation methods.

State Senators Dan Laughlin and Sharif Street have reintroduced a bill facilitating pot sales, with provisions to prevent marketing to children and address driving under the influence. Despite various attempts, similar bills have struggled to gain traction in the legislature.

Meredith Buettner, executive director of the Pennsylvania Cannabis Coalition, notes that Pennsylvania is well-prepared to meet increased demand for cannabis, with existing grower-processors and dispensaries poised to expand operations. She emphasizes that the state can learn from the legalization experiences of other states, which have navigated similar challenges.

While local tax rates for marijuana sales vary, data from Oregon in 2022 showed significant revenue generated from both state and municipal taxes. However, caution is advised, as excessive taxation could drive consumers back to the illicit market.

It’s important to note that despite state-level legalization efforts, marijuana remains illegal under federal law. However, there’s anticipation that the Drug Enforcement Agency may reclassify marijuana, potentially allowing cannabis businesses to claim tax deductions currently unavailable to them.

Overall, the potential legalization of adult-use marijuana in Pennsylvania presents both opportunities and challenges, with significant implications for taxation, law enforcement, and public health.

“Pennsylvania’S Proposed Pot Tax May Find Its Way to Municipal Coffers, Experts Say.” Www.Post-gazette.Com, 28 Feb. 2024, www.post-gazette.com/business/healthcare-business/2024/02/11/cannabis-legalization-pennsylvania-josh-shapiro-municipal-tax-benefit/stories/202402110087. Accessed 28 Feb. 2024.