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Marijuana bill passes Senate; prospects uncertain in House

Legislation setting up a regulatory framework for marijuana sales passed the Senate last week on a 21-18 vote.  The bill was heard in a subcommittee of House General Laws yesterday evening, which opted to defer action on the bill to a future meeting.  The House did not take up any House legislation on the subject before crossover, so yesterday’s hearing was the first in the House this session.

Legislation in 2021 legalized simple possession of marijuana for adults and growing and harvesting of up to four plants in a household, but many provisions governing the retail market for marijuana required reenactment by the 2022 General Assembly in order to take effect.  SB 391 (Ebbin) re-enacts many provisions and also makes some significant changes to the 2021 law.

Key provisions of SB 391 as passed by the Senate:

  • Sets out provisions for the granting of marijuana cultivation facility licenses, marijuana manufacturing facility licenses, marijuana testing facility licenses, marijuana wholesaler facility licenses, and retail marijuana store licenses. In general, no person may be granted a license in more than one category, although the Board of Directors of the Cannabis Control Authority may allow vertical integration by regulation for certain small businesses.
  • Retains the tax structure adopted in 2021, with a state tax of 21 percent levied on the sale of any retail marijuana, retail marijuana products, marijuana paraphernalia sold by a retail marijuana store, non-retail marijuana, and non-retail marijuana products, as well as an optional 3 percent local tax, to be imposed by ordinance, and levied in addition to any applicable local retail sales and use tax or meals tax.
  • Revises the 2021 provisions allowing the governing body of a locality to petition the circuit court for a referendum on the question of whether retail marijuana stores should be prohibited in the locality to allow for a referendum on whether “marijuana establishments” should be prohibited (the bill defines a “marijuana establishment” as “a marijuana cultivation facility, a marijuana testing facility, a marijuana manufacturing facility, a marijuana wholesaler, or a retail marijuana store”). As in the 2021 legislation, language authorizing the initial referendum takes effect July 1, 2022, and requires the referendum to be held by December 31, 2022.
  • Revises language governing referenda to provide that when a town holds a referendum on the question of prohibiting marijuana establishments, the town shall be treated as being separate and apart from its county, and that when a referendum is held in a county, any town located within the county is also to be treated as being separate and apart from the county.
  • While the bill retains 2021 language specifying local authority to regulate marijuana businesses in accordance with local zoning and land use requirements and business license requirements, it includes new language barring a locality from adopting any local ordinance, zoning requirement, land use requirement, or business license requirement that regulates marijuana establishments unless the ordinance or requirement applies with equal force and effect to “similarly situated businesses.”
  • Removes language from the 2021 bill that allowed localities to regulate the hours during which retail marijuana and marijuana products may be sold; instead prohibits retail marijuana stores from selling retail marijuana, retail marijuana products, immature marijuana plants, or marijuana seeds between the hours of 9 p.m. and 8 a.m.
  • Similar to existing language dealing with a pharmaceutical processor granted a retail license, adds language allowing an industrial hemp processor granted a retail marijuana store license to conduct retail sales at its registered industrial hemp processing facility and at up to two additional retail establishments upon request. If the existing pharmaceutical processor or industrial hemp processor is located within 1000 feet of a public or private elementary or secondary school, the processor may exercise its retail privileges at another location that is within a 10-mile radius and has been approved by the Cannabis Control Board.
  • The bill directs the Board of Directors of the Virginia Cannabis Control Authority to promulgate regulations by January 1, 2023 (although regulations shall not be adopted prior to July 1, 2022), and the provisions governing various types of licensure for different types of marijuana businesses take effect on the same date.
  • The bill authorizes the Virginia Cannabis Control Authority to start accepting applications for licenses on January 1, 2023, and to give preference to qualified social equity applicants (as determined by regulations promulgated by the Authority’s Board of Directors) between January 1, 2023, and January 1, 2024. Language directs the Authority to ensure geographic dispersion in the issuance of retail marijuana store licenses by periodically reassessing the issuance of licenses at specified intervals.
  • Most other provisions of the bill take effect January 1, 2024. However, the bill also provides for pharmaceutical processors and industrial hemp processors registered with the Commissioner of Agriculture and Consumer Services to sell cannabis products to adults (under the supervision of the Board of Pharmacy), beginning September 15, 2022.  Pharmaceutical processors must pay a one-time $6 million fee and industrial hemp processors must pay a one-time $500,000 fee to the Department of Taxation prior to engaging in retail sales.  The 21 percent state tax and the 3 percent local option excise tax would apply to these sales.  These transitional provisions expire when the Virginia Cannabis Control Authority notifies the Division of Legislative Services that pharmaceutical processors and industrial hemp processors are eligible to apply for licenses to cultivate, manufacture, wholesale, or sell marijuana at retail.

VACo Contacts:  Joe Lerch, AICP, Phyllis A. Errico, Esq., CAE, Katie Boyle

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