What You Need to Know About the Use, Sale and Distribution of Marijuana and Cannabis Products in Massachusetts
Contact Massachusetts Business Lawyer Kevin E. Thorn to Ensure You Are Compliant with the Law
Like many other states, Massachusetts’ laws regarding cannabis have undergone significant changes in recent years. While these changes have been overwhelmingly positive for residents of Massachusetts, these laws can be confusing. Even though the use and distribution of marijuana have been decriminalized, these new laws impose certain requirements and have some restrictions. Understanding the law can help you avoid any problems. Contact a Massachusetts cannabis tax attorney if you have questions about your specific situation.
In this handbook, we’ll discuss the following topics:
- An overview of Massachusetts law regulating the use, sale, and distribution of cannabis
- Medical marijuana
- What marijuana growers need to know
- What cannabis retailers need to know
- Tax considerations for marijuana businesses
Chapter 1: Massachusetts Cannabis Laws
In 2008, Massachusetts became the first state to decriminalize possession of marijuana in small amounts. Massachusetts voters subsequently voted to legalize the use of marijuana for medical purposes in 2012. The state legalized the recreational use of marijuana in 2016, with retail sales beginning in November of 2018.
Massachusetts is one of 11 states in America to legalize the recreational use of marijuana. However, it is important to recognize that there are still restrictions on the recreational use of marijuana in the state of Massachusetts:
- The use of marijuana for recreational purposes is legal only for adults 21 years and older.
- You cannot use cannabis products in any form in public.
- You may possess on your person up to one ounce of marijuana. You may possess up to 10 ounces in your home.
- You can grow up to six plants in your home or up to 12 plants for 2 or more adults.
- If you have more than one ounce of marijuana in your home, it must be kept in a secure and locked container.
- It is illegal to drive while under the influence of marijuana, and you cannot have an open container of marijuana in the vehicle.
Violations will typically result in a $100 fine. People who are found in possession of marijuana who are younger than 21 will be ordered to attend a drug awareness program. However, there are some violations that carry a heavier penalty:
- Providing marijuana to someone younger than 21 could result in a fine of up to $2,000 and a jail sentence of up to one year.
- Growing marijuana in a place that is visible to the public could result in a fine of up to $300 and forfeiture of the marijuana.
- Possession of an open container of marijuana in a vehicle could result in a fine of up to $500.
Recreational users should also keep in mind that employers and landlords can prohibit the use of marijuana. In addition, Massachusetts authorized cities and towns to develop their own restrictions on the use of marijuana within their municipal borders. There are many towns throughout Massachusetts that have elected to ban the retail sale of cannabis products.
Please note that, unfortunately, marijuana is still illegal under federal law and is classified as a Schedule I controlled substance. While simple possession rarely triggers the involvement of federal law enforcement, engaging in the sale of a large volume of marijuana across state lines can invite federal scrutiny. Federal law creates a number of potential issues for marijuana businesses that you may want to discuss with a Massachusetts marijuana attorney.
Chapter 2: Medical Marijuana in Massachusetts
The Benefits of Medical Marijuana
While research is ongoing, marijuana is widely used to treat a significant number of medical conditions. These conditions include the following:
- Side-effects of cancer treatments
- Alzheimer’s disease
- Crohn’s disease
- Multiple sclerosis
- Chronic pain
- Muscle spasms
- Chronic nausea
- Seizure disorders
In addition to physical conditions, medical marijuana is used to treat various mental health conditions, such as:
- Post-traumatic stress disorder (PTSD)
Many veterans have found relief from PTSD symptoms as a result of using medical marijuana. Veterans should be aware that while they will not be denied VA benefits as a result of marijuana use, they should only use medical marijuana after discussing it with their VA provider.
Use of Medical Marijuana Products in Massachusetts
Medical marijuana products come in a variety of forms. You should consult with your medical provider as to which method would be best for you. You can consume medical marijuana products in the following ways:
- Smoking it in a cigarette or a pipe
- Inhaling it by way of a vaporizing device such as a vape pen
- Eating it, such as in a brownie or candy
- Placing a few drops of CBD liquid under your tongue
- Applying it to your skin as a lotion, oil, or cream
Different methods have different advantages and disadvantages. For example, edible marijuana products are less harmful than smoking but take longer to take effect. Smoking or vaporizing marijuana, however, can take effect immediately. Which method works best for you will depend on the condition you are trying to treat.
How to Get Medical Marijuana as a Patient
In order to use marijuana for medical purposes, there are a number of requirements that you need to meet. If you want to purchase medical marijuana as a patient, you can only purchase it from a licensed dispensary. As a result, you will need to register with Massachusetts as a medical marijuana patient.
First, you will need to get a certification from your health care provider. After discussing your needs with them and assuming you qualify, they will provide you with a personal identification number (PIN) in order to register with the medical marijuana program.
You can then use your PIN to register online or by paper registration. We recommend that you register online, as the paper registration process will take far longer. In addition to your PIN, you will also need a valid form of identification. The program will accept your Massachusetts driver’s license or Massachusetts ID card, a U.S. Passport, or military ID. If you are using a passport or military ID, you will need to provide proof of residency in the state of Massachusetts. More information regarding how to register for the Massachusetts medical marijuana program is available here.
Patients should be aware that once they are registered, they will need to renew their registration every year. The Cannabis Control Commission recommends that you renew your registration 60 days prior to expiration.
Getting Licensed as a Medical Marijuana Dispensary in Massachusetts
If you want to open a business as a medical marijuana dispensary, you must first obtain a license from the Cannabis Control Commission. The process starts by submitting an Application of Intent. The fee to submit the Application is $1,500, payable in a bank or cashier’s check. You will also need to submit a Certificate of Good Standing and a remittance form.
Your Application of Intent will be reviewed by the Commission. If approved, they will invite you to submit a Management and Operations Profile. Your profile must include the following:
- A copy of your Corporation’s Articles of Incorporation and Bylaws
- A copy of your Corporation’s Certificate of Good Standing
- The relevant Character and Competency forms (individual or corporate)
- A completed Employment and Education form
- An authorization to perform a background check
- The appropriate remittance form
Finally, you should be aware that this is the most expensive step in the process - you must also pay a fee of $30,000 in the form of a bank or cashier’s check.
If your Management and Operations Profile is approved, the Commission may invite you to submit a Siting Profile. In addition to the Siting Profile form, you will have to also provide the following:
- Evidence of interest in your business location such as a deed to the property or your lease agreement
- Letters of local support or non-opposition
Upon completing the process, your business will then be a Registered Marijuana Dispensary. Keep in mind that you may be subject to ongoing registration requirements, particularly if you change locations or the name of your dispensary. You should also be sure to know and understand the tax implications of owning a dispensary. Contact Massachusetts marijuana business lawyer Kevin E. Thorn, Managing Partner at Thorn Law Group, today for more information.
Chapter 3: Cultivating and Manufacturing Marijuana in Massachusetts
Cultivating for Personal Use
As mentioned in Chapter 1, it is legal for adults over the age of 21 to grow up to six plants in their homes. If more than two people in the home are growing marijuana, you can grow up to 12 plants. The plants must be kept in a locked, secured area and out of public view.
Unless you already have plants, you will need to obtain seeds to begin cultivating marijuana. Someone can give you up to an ounce of seeds for you to start growing marijuana, or you can purchase them from a licensed retailer. You may be able to purchase seeds online, but keep in mind that mailing seeds across state lines remains illegal under federal law.
Of course, this applies only to growing marijuana for personal use - the situation gets more complicated if you intend to cultivate marijuana as part of a business.
If you plan to grow marijuana as a business, you will need to be licensed by the Cannabis Control Commission as a marijuana cultivator. As a cultivator, you will be able to grow, process, package, and deliver marijuana to retail establishments and dispensaries, but cannot sell or deliver marijuana directly to consumers.
Cultivators are regulated by the size of their “canopy” - the square footage of the area that will contain mature plants at any given time. Cultivators may obtain up to three licenses, but their total canopy cannot exceed up to 100,000 square feet. The size of the canopy is classified by tier, which will determine the application and licensing fees for your business:
- $100-$600 - initial application fee
- $625-$12,500 - marijuana cultivator licensing fee
Another option is to form a Craft Marijuana Cooperative, a form of marijuana cultivation business. Cultivation cooperatives are subject to many of the same restrictions such as the total canopy limitation but are not subject to a limited number of locations.
Another business opportunity in Massachusetts is to manufacture and sell marijuana products. However, you should be aware that, similar to cultivation, you cannot sell directly to consumers - you can only sell products to licensed retailers or dispensaries. Before you begin, you must obtain a Marijuana Product Manufacturer License. The costs of obtaining the license are as follows:
- $300 for the initial application
- $5,000 to obtain the license
As with any business, a good start is perhaps the best beginning. Regardless of what kind of business you want to start, we strongly urge you to engage an experienced Massachusetts business lawyer to help you navigate the regulatory process.
Chapter 4: A Massachusetts Cannabis Tax Attorney Can Assist Marijuana Retailers
The retail market opened for business in Massachusetts in November of 2018 as part of the legislation that legalized the recreational use of marijuana for adults. Marijuana retailers can sell marijuana and marijuana products directly to consumers for profit. If you are considering starting a direct-to-consumer marijuana business, you need to first obtain a marijuana retail license.
First, you will have to register your business with the Cannabis Control Commission and complete the application process. Similar to the Registered Marijuana Dispensary application discussed in Chapter 2, you will need to complete three separate packets:
- An Application of Intent. This will require that you disclose the individuals or entities that will be involved with your business. You will also have to disclose the source of your funding, where the business will be located, and what impact it will have on the surrounding community.
- A Background Check packet. This consists primarily of an authorization to conduct a background investigation of the people listed in your application of intent.
- A Management and Operations packet. In this part of the application process, you will provide detailed information concerning your business. You will have to provide copies of your corporate documents and your financial statements.
The application fee for a retail license is $300. If your application is approved, you will then need to pay a $5,000 licensing fee. Your retail license must be renewed each year.
You should also be aware that under Massachusetts law, certain localities may prohibit the establishment of a retail marijuana business. You should consult with Massachusetts marijuana lawyer Kevin E. Thorn before beginning the process to make sure that you can start your business in your desired location and ensure your compliance with all applicable laws.
The application process takes approximately 90 days to complete. However, mistakes or incomplete documents can cost you valuable time. A knowledgeable Massachusetts marijuana attorney can help you navigate the application process in order to avoid delays and get your business up and running as quickly as possible.
Chapter 5: Tax Considerations - Let a Massachusetts Cannabis Tax Attorney Help
It’s no secret that one of the motivations behind the legalization of marijuana is the potential tax revenue. As a result, recreational customers should expect to pay sales taxes when they purchase marijuana. However, marijuana businesses are also subject to taxation on any marijuana they sell. The sale of recreational marijuana is subject to the following taxes in the state of Massachusetts:
- A state sales tax of 6.25%
- A state excise tax of 10.75%
- A local sales tax of up to 3%
The state taxes will be uniform throughout the state for all marijuana retailers. However, the local sales tax will vary according to where your business is located. If you have more than one location, the taxes you pay could vary from one location to another.
Business taxation is a complicated area. While the sale of marijuana is subject to the taxes listed above, any accessories will be subject to the standard retail tax rates. Failure to pay the correct taxes can result in heavy penalties being assessed against your business.
Medical Marijuana Taxes
Registered Marijuana Dispensaries are not required to pay taxes on the sale of marijuana provided that they sell only to licensed medical marijuana patients. However, the sale of any other products or accessories may trigger a tax obligation.
In Chapter 1, we mentioned that the sale of marijuana is still illegal under federal law. Under IRS rules, you cannot deduct any business expenses for an illegal business on your federal tax returns. While the sale of marijuana is legal in Massachusetts, the Massachusetts Department of Revenue follows the IRS rules on business deductions. As a result, you cannot deduct your business expenses from the taxes you owe to the state of Massachusetts.
However, you may be able to deduct those costs directly incurred in connection with your business referred to as the “cost of goods sold.” It can be difficult to distinguish these from operating expenses, but some examples in the context of retail are your inventory and merchandise costs. Of course, taking a deduction that you are not entitled to take can be costly to your business - an experienced Massachusetts cannabis tax attorney can help you make sure that you are claiming the correct deductions and paying the appropriate taxes.
International Tax Considerations
Marijuana entrepreneurs who keep their assets in offshore accounts or send money overseas need to be aware of the potential international tax considerations. A complicated network of laws that are intended to prevent money laundering and tax evasion can cause a lot of problems for people who do not intend to break the law. A simple mistake could cost you your hard-earned profits. If you have offshore accounts or international business relationships, you should consult with a knowledgeable tax attorney like Kevin E. Thorn, Managing Partner of Thorn Law Group. He can help you avoid problems that could cripple your business. Call the office at 617-692-2989 or email him directly for immediate assistance.