The New Jersey Marijuana Legalization Act, known as Act S2703, has passed legislative review on its path to legalize adult-use marijuana in the State of New Jersey.  Effectively, this will make New Jersey the 11th (or 12th, depending on NY’s speed of implementation) state to fully legalize marijuana in United States of America. While most New Jerseyans and marijuana advocates are aware of the legalization process, many do not know the  specifics of how the New Jersey Marijuana Legalization Act intends to regulate, and internally profit, off the shoulders of the pioneers in the cannabis industry. In Layman’s Terms, we will break down and discuss what you need to know about the New Jersey Marijuana Legalization Act, S2703.

Advocates For The Marijuana Bill:

Senator Nicholas Scutari (Middlesex, Somerset, and Union County) and Senator Stephen Sweeney (Cumberland, Gloucester, and Salem County) are the authors of proposed bill S2703.  Senator Scutari has been tagged on numerous marijuana legalization bill drafts that have passed through Congress and is an experienced advocate for marijuana reform for the past decade.  Beginning with Governor Corzine, Scutari proposed Acts to forward the progress of medical marijuana in New Jersey. Stalled during the tenure of Governor Christie, Scutari has seen a window to push forward with his battle for drug war reform.  “The definition of insanity is doing the same thing twice and expecting a different outcome, and that is exactly what we are seeing with the drug war” Senator Scaturi is recorded to say on his interview for On The Record.

And the statistics support his premise.  In 2012 alone, New Jersey law enforcement made over 24,000 arrests for marijuana possession alone and spent $127 million taxpayer dollars on marijuana possession enforcement costs.  Additionally, black New Jerseyans were 3x more likely to be arrested for marijuana possession. e

The Division of Marijuana Enforcement

Similar to the New Jersey  Casino Control Commission, the proposed act will create a Cannabis Control Commission, now tentatively dubbed the Division of Marijuana Enforcement as it is still in the process of receiving an official name, to oversee virtually all areas of the cannabis industry.  The Cannabis Control Commission, or whatever name it formally takes, will reside within the State’s Department of Treasury. The Commission will have executive oversight over the regulatory and licensing rights for cannabis companies within the Garden State.

Division of Power: The NJ Marijuana Industry Licensing Structure

Notable divisions of power and regulations upon the nature of the cannabis business environment include the proposal of the following licensing structure:

  • Class 1 Marijuana Grower
    • For marijuana cultivation facilities, otherwise noted the entities responsible for growing the marijuana plant that contains the  delta-9-tetrahydrocannabinol (THC), the main psychoactive chemical contained in the cannabis plant, and supplying the marijuana product manufacturing facilities, as well as to other marijuana cultivation facilities, with strict restrictions against direct selling to consumers, i.e. adults of 21 years of age or older.
  • Class 2 Marijuana Processor
    • For marijuana processing facilities, otherwise noted entities responsible for activities such as trimming buds, packaging goods, assigning labels or content, etc.
  • Class 3 Marijuana Wholesaler
    • For marijuana warehousing facilities, where large quantities of marijuana can be stored for sale or store for earlier stages in the supply chain process.
  • Class 4 Marijuana Retailer
    • For marijuana storefronts, the locations where consumers can go to and purchase their preferred cannabis product.

For the first 3 years, no person, corporation or entity holding a Class 1 Marijuana Grower, Class 2 Marijuana Processor, or Class 3 Marijuana Wholesaler license is allowed to own a Class 4 Marijuana Retailer Location.   Essentially, no business is allowed to produce and sell their own product to the general public. Additionally, no person, corporation or entity is allowed to hold more than 3 marijuana licenses. This separation of powers in included in the Act as additional regulation to ensure collection of appropriate taxes from each entity and to prevent the emergence of early monopolies.  Conversely, the introduction of this section also adds a layer of regulation that prevents certain business structures from entering the market. Think Vineyards. Wine vineyards produce their own product, then host gatherings for consumers to come sample their products, listen to music, and hopefully take home a couple of bottles or a case. With the regulations in the S2703 Marijuana Legalization Act, similar structures will be illegal for businesses in the cannabis industry.

Marijuana Tax Rates and Who The Money Goes To

Originally expected to be passed into law in late November 2018, the Marijuana Legalization Act is meeting much adversity specifying its tax structure… mostly due to the exorbitant funds Gov. Murphy initially hoped to collect from the sale of cannabis.  Taking note of California’s failed tax policy on cannabis sales, New Jersey legislators have revised the tax structure indicated in previous acts, and has proposed a tiered tax rollout plan for the current marijuana legalization bill. In addition to federal, state, and local taxes,  marijuana products and services will be charged an excise tax of 10% in year one, 15% in year two, 20% in year 3, and 25% for year 4 onward.  This is an interesting structure as California operates under a 15% state levy on marijuana sales that has collected less revenue than expected due to consumers turning to cheaper rates on the black market.  Although New Jersey may not have as robust of a black market for marijuana products as California, it is an interesting choice by the legislature to only allow 1 year for the legal market to become established before raising the tax rate to a controversial level.

The exorbitant tax rates will not be used to invest in the public economy, as may be believed by some New Jerseyans.  The Marijuana Legalization Act specifically declares the delegation of the tax funds to go entirely to the Division of Marijuana Enforcement, except for 1% that will be allocated annually to the local government in which the entity is located, and is expected to be used for drug prevention and treatment.  Given that New Jersey’s legal weed industry is expected to generate $300+ million sales, it drives the question as to why the Division of Marijuana Enforcement needs to keep all that tax revenue.

Under the proposed act, possessing, using, consuming, transferring, and transporting personal amounts of marijuana and marijuana paraphernalia will become legal in the state of NJ.

Personal amounts have been determined to be the following thresholds:

  • One ounce or less of marijuana leaf
  • 16 ounces or less of marijuana-infused solid products (brownies)
  • 72 ounces or less of marijuana-infused liquid products (juices)
  • 7 grams or less of marijuana concentrate
  • 6 immature (not budding) marijuana plants

It is unknown what one is to do once their immature marijuana plant becomes mature, aka ready to be harvested for marijuana.  

Additionally, past criminal cases involving marijuana use or possession may be waived and/or removed from criminal records.  

Notable Clauses in the Marijuana Act

  • The proposed bill includes a framework to ensure medical marijuana entities under the “New Jersey Compassionate Use Medical Marijuana Act” receive first dibs at marijuana supply channels and are exempt from the excise tax, i.e. a tax charged to a specific good and that specific good only.  
  • There will be a Marijuana Regulation Review Commission that will oversee and review all actions taken by the Division of Marijuana Enforcement.  This Commission will be comprised of three members and shall be selected as such: One member appointed by the Governor (Gov. Phil Murphy), one member appointed by the President of the Senate (Sen. Stephen Sweeney), and one member from the General Assembly who will be appointed by the Speaker of the General Assembly (Craig Coughlin).
    The Division of Marijuana Enforcement shall be headed by a Director that will be chosen by the Governor.  
    All funds collected from the excise tax on the cannabis industry will be collected and used by the Division of Marijuana Enforcement….there is no clause in the act noting a delegation of funds for public projects.

For You

The source for this information is the act S2703 itself, which can be found in entirety here.   

Any questions or comments?  Please leave your feedback below!

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