The 16th state to legalize adult-use cannabis.
Kevin Conroy
Michael McQueeny
Dutchie does not provide compliance advice. Merchants are responsible for their own compliance. External Dutchie compliance documentation may be updated from time to time and has been prepared for informational purposes only, is not intended to provide, and should not be relied on for, tax, legal or compliance advice. Merchants should consult their own tax, legal and compliance advisors to determine how best to operate within the cannabis industry.
Through legislative and regulatory enactments, the State of New York initiated its adult-use licensing opportunities through three (3) preliminary types of licenses, including:
New York’s Cannabis Control Board (the Board) is the organization responsible for issuing licenses for businesses to participate in the state’s adult-use, medical, and cannabinoid hemp industries, with the Office of Cannabis Management (the Office) responsible for regulating and overseeing day-to-day oversight and enforcement. While the application period for all three (3) of these initial licensing types have closed, the license issuance process is ongoing, and the Office is continuing to develop regulations and guidance that will outline how an individual can apply for and receive a license in the state’s new adult-use cannabis market.
As set forth previously, the prior adult-use licensing rounds in New York have been limited to conditional licenses with specified qualifying criteria. At its September 12, 2023, the Board voted to open a non-conditional application round commencing on October 4, 2023, and open until December 4, 2023, for specific types of licenses.
By way of reminder, New York’s adult-use cannabis law identifies the following types of adult-use licenses:
However, the application round opening up on October 4, 2023 will be limited to the following types of licenses:
RONDs and RODs may begin submitting the required documentation to convert from medical-only to adult-use, but are not subject to the same application timeline and requirements for all other types of licenses.
OCM has indicated that it estimates that over 1,000 licenses should be issued in the licensing application window opening on October 4. Following submission, applicants will be pooled based on: (a) license type sought; (b) social and economic equity certification; and (c) provisional status. Applicants for retail (both provisional and final) will then be split evenly between New York City and the rest of the State. Applicants will then be queued in their distinct pools using a randomized process. Applicants will be reviewed based on their randomized queue order, with applications reviewed until the number of licenses allocated for the license window have been issued. Those not reviewed or selected must resubmit their application in future rounds.
Importantly, social and economic equity applicants will be reviewed until the Board has issued the number of licenses allocated for the application window. OCM has indicated that qualifying in multiple social and economic equity categories will increase an applicant’s changes in the random order queuing process.
Site control is required for those applying for cultivation, processing, and distribution. Site control is optional for those applying as either a retail or microbusiness, but retailers and/or microbusinesses with site control will be prioritized in review. Those applying with site control are directed by OCM to apply with an executed deed or executed lease.
CAURD licensees are the first retail dispensaries to open for legal adult-use cannabis sales in New York State, establishing businesses owned by justice-involved individuals at the bedrock of New York’s adult-use cannabis market.
Adult-use sales commenced through a CAURD licensee at the end of the 2022, with more CAURD licenses opening since and speeding the delivery of investments into communities across New York State that were impacted by the disproportionate enforcement of cannabis prohibition.
An Adult-Use Conditional Cultivator license authorizes eligible hemp growers to grow cannabis containing over 0.3% THC for the state’s up and coming adult-use market.
To be eligible to apply, the hemp grower must have been authorized to grow hemp under the Department of Agriculture and Markets Industrial Hemp Research Pilot Program. The application window for the Adult-Use Conditional Cultivator License approved by the Board was March 15, 2022 – June 30, 2022.
The Adult-use Conditional Processor license allows businesses that are already licensed to process cannabinoid hemp in the Cannabinoid Hemp Program to apply for a license to process adult-use cannabis. This application opportunity is only available to active cannabinoid hemp processor license-holders who applied for their cannabinoid hemp license before January 1, 2022.
On June 23, 2022, the Board approved the application and opening of the application window for Conditional Processors beginning June 28, 2022 through August 31, 2022.
The location of your New York dispensary must be approved by the Office as part of the dispensary’s site plan and comply with local zoning ordinances.
The licensed premises of the dispensary will only be approved if the dispensary is in a location consistent with public convenience and advantage standards. Factors that influence an approval decision include:
An adult-use retail dispensary must be located in a store, the main entrance to which must be from the street level and located on a public thoroughfare in premises which may be occupied, operated or conducted for business, trade or industry. In addition to these standards, the licensed premises of the dispensary cannot be near a school or place of worship as stated in the Cannabis Law or community facility.
A dispensary cannot be on the same road and within 500 feet of school grounds, as defined in Section 409(2) of the New York State Education Law.
A dispensary cannot be on the same street or avenue and within 200 feet of a building occupied exclusively as a house of worship.
New York dispensaries must implement a security plan with adequate security measures to deter theft or loss of cannabis and/or cash, prevent unauthorized entrance into areas containing cannabis products, and ensure the safety of the dispensary’s employees and the general public.
In addition:
New York dispensaries must use an inventory tracking system capable of compiling the dispensary’s cannabis product inventory, transaction data, and tax liability. That system must be compatible and capable of reporting real-time data to the Office through the state’s traceability system.
As a dispensary operator in New York, it’s your responsibility to:
You’ll also want to review your Point of Sale’s authorized users on a regular basis and remove any users who are no longer authorized to enter information into the inventory tracking system.
OCM has made clear that licensees are permitted to use any third-party software they want, with the only requirement that the tracking system be able to transmit data to OCM’s BioTrack system. As set forth previously, all licensees are required to have an inventory tracking system that will transmit data through an application program interface (API) to OCM’s BioTrack system.
Adults 21 and older can purchase up to three ounces of cannabis and up to 24 grams of concentrated cannabis at a time in New York.
The information below outlines the taxation and revenue provisions as set out in the MRTA (Marijuana Regulation & Taxation Act (MRTA).
First, a tax is imposed on the distributor based on the milligrams (mg) of total THC in the product. There are different rates of tax depending on the cannabis product form.
The mg per total THC tax accrues when cannabis is sold from a distributor to a retailer and is paid to the State by the distributor. If the distributor is also the licensed retailer, such as a microbusiness or registered organization, the tax accrues at the time of the retail sale.
Second, there’s a state excise tax imposed on the sale of cannabis products by a retailer to a cannabis consumer at nine (9) percent of the products’ price.
Third, there is a local excise tax imposed on the sale of cannabis products by a retailer to a cannabis consumer at 4% of the products’ price. This tax is distributed to local governments based on where the retail dispensary is located. Twenty-five percent of the tax revenue goes to the county and seventy-five percent goes to the cities, town, or villages within the county as a proportion of cannabis sales.
All licensees required to collect adult-use cannabis tax under the MRTA are required to register with the Department of Taxation and Finance.
Dispensary marketing and advertising can’t jeopardize public health or safety; make false or misleading claims; or be attractive to individuals under twenty-one. To protect public health and safety, most ads are required to include warnings and other important consumer information. The exact requirements depend on the nature of the ad. (For more detailed information, check out the OCM’s Marketing and Advertising Guidelines).
Licensees must ensure that their dispensary adheres to the below requirements as they pertain to marketing and advertising.
Marketing materials can’t be easily seen by individuals under twenty-one.
Licensees cannot market, advertise, or place advertisements within 500 ft of an elementary or secondary school ground (as “school ground” is defined in the Education Law) or a community facility (such as a recreation center or facility, childcare center, playground, public park, or library). The distance between such establishment and a dispensary’s advertisements will be measured from the advertisement to either the nearest point of the school or the nearest entrance of the community facility.
Licensees can only place an advertisement somewhere if at least 90% of the advertisement’s audience is reasonably expected to be twenty-one or older. Licensees must have reliable evidence of the composition of the audience that will view these advertisements.
Marketing materials can’t be attractive to individuals under twenty-one.
Despite restrictions on audience composition and advertisement placement, some advertisements will still be seen by some individuals under twenty-one. Restrictions on the way advertisements look and feel can lessen the likelihood that individuals under twenty-one will be influenced by them.
This means:
Marketing, advertising, and advertisements can’t make health claims.
Dispensaries cannot characterize the relationship of any cannabis product to a disease or health-related condition or symptom. This means:
Think it matters if you believe a health claim can be substantiated through scientific research? Think again! Licensees cannot make any health claims in marketing, advertising, or advertisements under any circumstances. Some examples of health claims that would be prohibited are:
Marketing and advertisements can’t promote overconsumption.
Cannabis products are required to be labeled with the recommended serving size and clear usage instructions. Advertisements that encourage consumers to consume significantly more than a product’s recommended serving size at a single time are prohibited.
Marketing and advertisements can’t promote product potency.
This does not prohibit a dispensary from stating a product’s THC concentration but does prohibit them from promoting the THC concentration or encouraging consumers to use more potent products. When choosing to state a product’s THC concentration in marketing materials (including product menus), dispensaries should aim to list the concentration of all products included in that advertisement.
Marketing and advertisements can’t use freebies, discounts, giveaways, or promotional swag.
Consumers cannot be coerced into over-purchasing cannabis products. Dispensaries cannot advertise through free promotional items or giveaway any promotional items or any cannabis products, for any reason, unless the promotional item is listed below.
This means dispensaries cannot offer gifts, hold giveaways, or offer any loyalty programs, rewards systems, or other discounts which would result in a consumer receiving a free promotional item, a free cannabis product, or a discount on a cannabis product.
Some exceptions:
Dispensaries can’t advertise giveaways, discounts, price reductions, points-based reward systems, or customer loyalty programs. This means dispensaries cannot use words including, but not limited to, “sale”, “free”, “price drop”, or “discount” on a menu, in any communications to consumers, or in any other advertisements.
These restrictions don’t prohibit retail dispensaries from changing the price of cannabis products, but do prevent the dispensary (or any other licensee) from promoting discounts in their marketing and advertising and from changing the price of an item as a way to market or advertise.
Marketing and advertisements can’t misrepresent the product.
Licensees cannot misrepresent a product as a medical cannabis or cannabinoid hemp (i.e. CBD) product. Any marketing, advertising, or advertisements which create confusion as to whether a product is a medical cannabis product, adult-use cannabis product, or cannabinoid hemp product are prohibited.
Examples of misrepresentation include, but are not limited to:
Marketing and advertisements can’t be obscene or indecent.
Examples of marketing, advertising, and advertisements that are obscene or indecent would include, but are not limited to, those that depict nudity or use profanity.
Marketing and advertisements can’t be false, misleading, or encourage illegal activity.
Examples of this include, but are not limited to:
Marketing and advertisements can only use special branding material if the licensee is authorized to use such material.
At a later date, the Office may identify certain visuals or audio as special branding material. These special branding materials, once identified, will only be authorized for use on certain types of products or by certain types of licensees. Licensees cannot use special branding material which they are not authorized to use.
Dispensaries also cannot retain customers’ personal information for marketing and advertising purposes unless they consent to the information being retained for this reason.
At a minimum, all retail packages must be child-resistant, tamper-proof, and fully enclose the product. The retail package must be sealed in a way that protects against light and other contaminants that may potentially damage the product during storage. The package must also not pass on any toxic or harmful substance to the cannabis product. If the package contains multiple servings, the package must be resealable.
Cannabis product packaging, which includes all packaging elements except non-consumer packaging, cannot contain:
Cannabis product packaging in New York also cannot be made of plastic, unless containing a minimum 25% post-consumer recycled content. Dispensaries must comply with this requirement by January 1, 2024, unless otherwise noted by the Board.
Required documentation for packaging
New York retailers are required to maintain a copy of the certificate showing that each retail package into which the dispensary places products is child-resistant and complies with the requirements of Poison Prevention Packaging Standards.
All required labeling text must be no smaller than 6-point font size. All required text must be clearly written or printed and in the English language. In addition to the required labeling in English, dispensaries can include accurate foreign language translation(s) of the required labels.
Ingredients
The ingredients list must appear on the retail package. The list must include all active and inactive ingredients in descending order, by weight in the cannabis product. The ingredient list must include and separately list, in bold, any major allergens set forth in the Food Allergen Labeling and Consumer Protection Act of 2004.
Edible products and beverage products must also include a nutritional label. Cannabis products marketed and sold as dietary supplements must also include a supplement fact panel compliant with federal codes for nutritional labels of dietary supplements.
Other required information
In addition to a list of all ingredients, the retail package must contain:
Required Warnings
Retail packaging must contain the following warnings in bold:
All cannabis dispensaries must be in a physical brick-and-mortar store. In addition to services offered inside of the store, licensees may provide delivery services if the training manual includes written procedures for how employees will provide delivery service. No more than twenty-five employees may provide delivery services for the licensee per week.
Customers must pay for delivery orders directly, and deliveries must be pre-paid at the time the order is made. Payment can be made by bank debit card. Budtenders cannot first purchase the cannabis product and then be reimbursed by the customer. Unless ordering in-person, the customer must attest when placing their order that the individual ordering is twenty-one years of age or older. If the individual placing the order will not be the individual accepting the order, the individual placing the order must also attest that the individual accepting the order is over twenty-one years of age.
Before providing the cannabis product to the customer, the employee completing the delivery must verify the identity and the age of the individual accepting the order at the point of delivery or curb-side pick-up. The identity of the individual who placed the order and, if applicable, the individual who accepted the order must be recorded in the licensees’ point-of-sale system.
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Legally reviewed by Foley Hoag LLP
Kevin Conroy
Kevin Conroy is a partner in Foley Hoag’s Boston office with a primary focus on cannabis regulatory matters. He co-chairs the firm’s Cannabis and State Attorney General groups.
Kevin advises a variety of cannabis investors and operators across the United States regarding compliance with state and local cannabis laws and regulations. He has helped clients secure cannabis licenses in multiple states and works with them to obtain state approval for changes of ownership as part of multi-state and international transactions. He also advises clients in enforcement proceedings brought by state cannabis regulators.
Kevin has been advising cannabis clients since the Commonwealth of Massachusetts legalized medical use marijuana in 2012. In Massachusetts, he represents cannabis clients who have adult-use and medical licenses and represents a variety of clients who are in the adult-use application process. Kevin works regularly with the staff of the Massachusetts Cannabis Control Commission and represents clients who are the subject of enforcement proceedings by the Commission.
Kevin previously served as the Massachusetts Deputy Attorney General, supervising nearly all civil matters in the office including non-profit, consumer enforcement, insurance, financial services, health care and energy.
Michael McQueeny
As a partner in Foley Hoag’s national Cannabis Group, Mike McQueeny has provided trusted counsel to startups and multi-state operators alike on issues associated with legislative/regulatory development and compliance. He has assisted clients in drafting and securing competitive state cannabis permits, having worked on winning applications in multiple states.
Mike counsels clients on complex issues of regulatory compliance, including through advising companies on regulatory considerations associated with anticipated mergers and acquisition.
Mike has frequently been consulted as a point person for developments and insight for several national and local media outlets including CBS News, Fox 5 New York, News 12, Cheddar TV, ROI-NJ, Forbes, the Washington Post, Benzinga, the Star-Ledger, NJ Cannabis Insider, NJBIZ, and the New Jersey Law Journal. Mike has also been the recipient of several honorary awards, including his selection by New Jersey’s largest newspaper as one of eighteen honorees as part of a series focused on the people that helped shape the cannabis industry in New Jersey in the lead-up to New Jersey’s adult-use cannabis referendum. More recently, Mike was selected for inclusion on the “Insider 100: Cannabis Power List,” which recognizes leading influential voices in the long battle to end cannabis prohibition.
