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New York marijuana cultivators and processors are pushing Governor Kathy Hochul to approve a measure that would simplify how they handle tax filings, switching the system to an annual basis.
Currently, businesses are required to pay a 9% marijuana excise tax on wholesale prices every quarter. The change would be a minor adjustment to existing regulations but one that could offer significant relief to those struggling in an already challenging market, according to Jaunty co-founder and CEO Nick Guarino.
Companies like Jaunty, alongside Ayrloom and Alliance, collaborated with Park Strategies to draft the measure, receiving support from Assemblywoman Donna Lupardo and State Senator Jeremy Cooney. The measure already passed through the state legislature.
The proposed annual tax structure is similar to the approach that has been successfully implemented in the craft alcohol industry, according to Aryloom president Mack Hueber. He maintained that it makes sense to use the same strategy for cannabis businesses if it is effective for craft beers.
According to Hueber, the current quarterly tax schedule creates unnecessary financial strain for cultivators, wholesalers, and processors who are required to submit their tax payments within 20 days after the quarter ends, yet retailers have 30 days to settle their invoices. This misalignment often forces businesses to pay taxes before they’ve received the revenue needed to cover the payments, leaving them vulnerable to late fees.
Hueber pointed out that this adjustment would give businesses the time to collect funds, making it easier to pay taxes without jeopardizing cash flow. Many cannabis businesses are already under significant financial pressure, and he believes fixing the tax payment timing is a logical and easy solution. Guarino added that shifting to annual payments would alleviate the struggle of meeting quarterly deadlines while juggling business expenses and outstanding invoices.
The push for tax reform comes after significant changes earlier in the year when the state replaced its potency-based tax with a flat 9% excise tax. Hueber described the previous tax structure, which calculated payments based on the THC content of products, as extremely complicated and burdensome.
While the shift to a flat tax was a step in the right direction, many businesses, including Jaunty, are still dealing with the consequences of past policies. Guarino shared that his company is on a state payment plan, paying $65,000 monthly to cover back taxes. When combined with current tax liabilities, Jaunty expects to owe approximately $400,000 this month alone. He contrasted the situation with personal income taxes, where the IRS provides longer repayment terms, noting that the excise tax system offers much less flexibility.
Beyond the tax reform bill, two other marijuana-related proposals are awaiting the governor’s decision. One aims to officially classify cannabis as an agricultural crop, while the other seeks to allow farmers to hold market-style events to increase sales. Both the tax legislation and the agricultural bill have gained attention from the governor’s office, raising hopes that action will soon be taken.
The challenge of unfavorable tax policies isn’t only affecting cannabis firms in New York State. Even established companies like SNDL Inc. (NASDAQ: SNDL) have to contend with tax systems that hamstring their potential for growth in many jurisdictions.
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