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Eight Things To Know About S.54

Photo by Esteban Lopez on Unsplash
Evan Johnson
Evan Johnson 1 Oct 2019

As Vermont joins a list of ten other states with legalized marijuana, a lingering question for the canna-curious is where the bill stands, what it does, and what the latest on the bill is. Heady Vermont and Vermont Cannabis Solutions are hosting a panel discussion about the tax and regulate bill, ahead of the legislative session, when the House Ways and Means committee will pick up the current version of the bill. 

Despite cannabis being legalized, and individuals being able to grow and possess the plant and its derivatives, there is no infrastructure yet to tax and regulate sales. That’s where S. 54 comes in. 

Talking Tax & Regulate: A Deep Dive on S. 54 will be held Wednesday, October 2 in the Contois Auditorium at 149 Church Street in Burlington, from 12 to 2 p.m. and will feature a panel of speakers who have been involved with Vermont’s cannabis movement or with the crafting of the bill. They include Laura Subin, Director of the Vermont Coalition to Regulate Marijuana; John Gannon, a Windham County Representative and Vice Chair of the House Committee on Government Operations; Dave Silberman, an attorney from Middlebury and cannabis reform advocate; and Tim Fair and Andrew Subin, partners at Vermont Cannabis Solutions.  

In advance of the event, here’s a helpful primer on the bill’s current situation and what it will do.

  1. You still can’t buy weed

Let’s get the most obvious point out of the way first. Despite cannabis being legalized, and individuals being able to grow and possess the plant and its derivatives, there is no infrastructure yet to tax and regulate sales. That’s where S. 54 comes in. 

  1. The bill is currently sitting in the House

It’s been a long path to reforming prohibition-era cannabis laws, and Vermont’s legislature still hasn’t pushed the bill across the finish line. During the last session, S. 54, a bill that would create the Cannabis Control Commission and authorize it to set the regulatory framework for cannabis sales around the state, made it out of the Senate and into the House, where it stopped at the House Ways and Means Committee. 

“If we were to deny licenses and employment opportunities within this industry to people with a criminal record we would just be further perpetuating that system racism and those historic biases.”

When the legislature reconvenes in January, Ways & Means will take up the bill again. It will need to go through the Appropriations committee before the entire House can vote on it.

“Once it gets to the floor of the house, we have a very clear majority,” Dave Silberman said. “I would not be surprised if by the end of the process we ended up with a veto-proof majority to pass this bill.”

  1. The bill has evolved to include provisions on social equity 

The bill is not the same as when it debuted last winter. Advocates, lobbyists, and various other experts have all submitted testimony on parts of the bill, what the bill should or should not include, and how the commission created by the bill will operate. 

One change is that the Cannabis Control Commission will not be allowed to deny a license to an individual based on their past criminal history unless they are able to demonstrate that the person poses a credible risk to public safety, or to the proper function of the regulated market. 

“We hope that is a better tool for keeping large businesses that are controlled from outside of Vermont from taking over the entire market,”

“That’s huge,” says Silberman, “because we know that historically, cannabis prohibition has been enforced disproportionately against minorities and people who are not wealthy. If we were to deny licenses and employment opportunities within this industry to people with a criminal record we would just be further perpetuating that system racism and those historic biases.”

Also, the Senate passed a requirement as part of the bill that one of the commissioners have expertise in social equity, though Silberman says it isn’t clear whether that will remain in the House’s version. 

  1. The bill tries to limit the size monopolies can reach

Federal prohibition has an interesting tax consequence; sellers of cannabis cannot deduct their business expenses against their income when figuring out their net income for tax purposes. The only deductions allowed are those associated with the cost of goods. 

That’s not a problem cannabis growers have, because every part of the operation – from farm’s rent to the cost of the grow lights to the wages of employees – is an associated cost and therefore deductible. Because of this, many cannabis companies are vertically integrated; the cultivation, production, and sale of all goods are all owned by the same party. 

The House Government Operations Committee has come close to meeting Scott’s demands by creating a substance misuse prevention fund filled by 30 percent of the tax revenue from pot sales.

While vertical integration can be beneficial to a properly functioning market that provides consumers with high quality products at good prices, legislators and others watching the bill closely say that horizontal integration – owning a wide range of the supply chain – will lead to higher prices and consolidation in the same way as other industries. Advocates want to see loopholes closed. The bill allows for five types of licenses and a person can own a maximum of one of each. 

“We hope that is a better tool for keeping large businesses that are controlled from outside of Vermont from taking over the entire market,” Rep. John Gannon said.

  1. The bill sets timelines for licenses and opening dispensaries

The newly created Cannabis Control Commission would begin approving licenses for cultivators and vertically integrated licenses starting in February, 2021, testing laboratories in April, product manufacturers and wholesalers in May, and retailers in July 2021. Should the bill be passed in the coming session, those dates will be pushed back a year.  

  1. Public safety is also part of the bill

54 would establish a saliva testing protocol to help police investigate impaired driving, something Gov. Phil Scott has called for in any tax and regulate bill. The House Government Operations Committee has come close to meeting Scott’s demands by creating a substance misuse prevention fund filled by 30 percent of the tax revenue from pot sales. Authorities will need a warrant to collect a sample from an unwilling individual and the saliva will be sent to a lab for analysis.

  1. Local control makes the cut

There’s been a fair amount of news lately about towns and cities dictating how sales of cannabis are regulated – or even allowed. In Massachusetts, authorities allege two men extorted money – on behalf of the mayor of Fall River – from companies seeking to obtain a state license to operate cannabis retail businesses. The men pleaded guilty in federal court to charges of extortion, conspiracy and making false statements (the mayor has pled not guilty to multiple federal corruption charges). 

“If the people that are in favor of a tax and regulate system take this as a moment of unity and get it across the finish line, this would be really productive.”

Here in Vermont, the towns of Clarendon and Newport have passed a ban on any recreational marijuana products or sales within town limits and Killington is weighing a similar measure. Rep. Gannon described a “balancing act” between allowing local growers to participate in the legal market, and allowing towns control. 

As a compromise, towns can vote to ban dispensaries or other types of licenses, including growers, but only by a vote.

“They still need to comply with local zoning ordinances and towns can set up their own cannabis control commission, but they can’t totally ban any type of license unless the towns vote on it,” said Gannon.   

  1. Gov. Phil Scott is watching 

“If the people that are in favor of a tax and regulate system take this as a moment of unity and get it across the finish line, this would be really productive,” says Laura Subin of Regulate Vermont. 

Once it crosses the finish line, then what? That finish line is the desk of a Republican governor who’s been skeptical of cannabis legalization and is very specific about what he wants to see in the bill. If the House can obtain a veto-proof majority, they can go without him. 

Will the bill change before the rest of the House votes on it? Probably, and the discussion continues on Wednesday’s panel. 

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