In this blog, we review the top questions that our New York Cannabis Regulatory, Security, Engineering, Legal, and Real Estate Experts answered during our webinar.
1. What insurance coverage is required by regulators?
We are still waiting for the final regulations however based on other states typical insurance includes product liability, property, workers’ compensation, cyber liability insurance, etc. Regarding the cultivation sector, you may require property and crop insurance. For manufacturing cannabis businesses, you’ll also want to look into equipment insurance.
2. Do I need to electronically file my sales and use tax returns with the state tax authority?
If you sell tangible personal property anywhere in New York State, yes you must register with the Tax Department. You must also obtain a Certificate of Authority, collect tax, and report these sales as instructed on your sales tax returns. More specifically you are required to register for the adult-use cannabis products tax and file returns with the Tax Department if you are: an adult-use cannabis products distributor that sells adult-use cannabis products to an adult-use cannabis products retailer, and/ or an adult-use cannabis products retailer that sells or transfers adult-use cannabis products to a retail customer.
3. How can I set my dispensary apart from others?
Using traditional retail methods such as loyalty programs or discounts/specials is a good way to bring in and retain customers. We believe very important way dispensaries can set themselves apart is by actively engaging with community efforts within the area they’re located in.
4. What are common questions you get when people are interested in investing or getting involved in the industry?
-Make sure the property is zoned
-Look at how other markets (i.e. medical) are zoned as a baseline
-Are your lenders okay with your business being a cannabis business (Some financiers are not willing to invest in cannabis businesses)
-Zoning is the most important
5. What are the key things investors should be aware of in terms of buying buildings or state rules around zoning?
A lot of people have preconceived notions about working with cannabis businesses like;
-How big should my retail space be?
-How long is my construction going to take on my property?
-What are the most common pitfalls during site selection?
6. What is the difference between the “Justice Involved Individual” (JII) designation required for the Conditional Adult Use Retail Dispensary license and the “Social & Economic Equity Applicant” designation for the 9 standard licenses?
A lot of people are confusing social justice applicants with social equity applicants. With social justice applicants, people had to be convicted (arrested) for a cannabis-related crime prior to March 31st, 2021. This includes anyone as long as you are 10% owner in a business despite race, gender, or ethnicity. Social Equity applicants are relevant only to the other conditional license categories to be released with more criteria such as race or ethnicity. Contact Cannabis License Experts at email@example.com for more information.
7. Do the recipients of this first round of Conditional Adult Use Retail Dispensary licenses have to use the DASNY spaces or can we use our own if we don’t need the funds?
8. Does an Adjournment in Contemplation of Dismissal (ACD) qualify someone as a JII for CAURD?
An ACD is not considered a conviction. These low-level cannabis offenses aren’t considered due to an adjournment and ultimately the case ends up being dismissed.
9. Do convicted individuals and profitable business owners have to be the same person for CAURD?
Yes, they do. The person that was convicted can apply (Or Immediate family member) but must have owned a business that was profitable for at least 2 years. They must also own at least 10% of that business.
This is an individual as defined for the licensee on the New York cannabis applications for which a lot of information is required. Your spouse would also be considered a TPI. They are very important individuals.
- Have they been convicted?
- Banking Information
- Cannot apply for another conditional cannabis license in the state
- Tax information
- Spousal disclosures
11. How big does my electrical service need to be?
- Dispensary’s need about 2000 amp 3 bolt system
- Cultivation facilities are much bigger and it depends on the HVAC system to determine how much lighting you’ll need as well as; location, size, the voltage of your HVAC system, etc. LED lights for example reduce your energy cost by at least 40%
12. Is it more cost-effective to retrofit an existing building for my business or to build something new?
It depends largely on the region the price of land in California is much more expensive than in Alabama for example. Typically it is more cost-effective to retrofit an existing building for your cannabis business instead of starting from scratch and building something new.
13. What are some of the unique security problems in the cannabis industry?
It’s a high-risk industry. So far, our experience in New York has consisted of rural cultivation facilities with limited access to power and internet which is required for the majority of security systems to function properly. Specifically to the cannabis industry, it’s hiring the right vendor who understands the regulations and will implement those requirements into their systems.
It’s important to hire the right people that understand your needs as a cannabis business.
14. How much security does a cannabis business need? I.e. inventory tracking, digital records, and product security.
All of the above need to be considered; secured storage, safes, alarms, surveillance systems should be tested monthly, etc. Commercial grade systems should be used at all times in case you’re audited at any point. These systems will be able to provide you with the audit trail needed for the five years New York currently requires for record-keeping.
15. What track and trace system should I have in place for compliance and reporting?
Biotrack is currently required for New York medical licenses but anything that integrates with BiotTrack, like Dutchie and COVA, would work in other regions.
16. What level of security clearance do my cannabis businesses require?
Some states require background checks. The OCM may review on a case-by-case basis in regards to a felony (i.e., selling or employing a minor to transport, carry, give away, or sell any controlled substance.
Cannabis in New York Regulatory Questions:
17. How do I get a CAURD license?
- The application window is open now until the end of September
- There are two pathways at this time
- Qualifying Business
- Justice Involved Individual (JI)
- MJ conviction (or conviction of another offense if MJ charges dismissed) in NY or spouse, legal guardian, or dependent of someone with MJ conviction.
- NY residency at the time of the arrest.
- Business Experience
- 10% owner of a business with control over that business.
- 2 years profit during time as an owner.
- Significant Presence
- Assets, residency, or another tie to NY
- Sole Control
- Direct management of business
- Must own 30% of the license; License as a whole must be owned by a majority (51%) of JIs
- Justice Involved Individual (JI)
- Qualifying Nonprofit Criteria of nonprofit’s mission
- JI board member
- 5 full-time employees
- Social enterprise with 2 years of net profits
- Sole Control
- Owns 30% of the license and the license as a whole must be owned by a majority (51%) of qualifying nonprofits and/or JIs
18. What documents do I need to apply for a CAURD license?
- Evidence of the MJ conviction (court documents, rap sheet) and proof as the relative if applicable (birth/marriage certificate)
- Proof of where the arrest took place (utility bills, leases)
- Business records (tax documents, bank account records, contracts, financial statements)
- Significant presence (deeds, vehicle ownership, leases)
- Business organization documents identifying all owners, TPIs, and their spouses
- TPI forms
- Additional materials if you are awarded a license
19. What licenses are available and how do I know if I’m eligible?
- CAURD is open now until the end of September
- Manufacturing ending today
- Labs are to be in the near future
- More licenses will become available including retail without a social equity requirement
- Consultants/CLE can review the application for completeness and determine if you qualify
20. Can I get a cannabis license in NY if I’m not social equity?
- Yes, more licenses will become available for all types in the future for all license types
21. Once applications open to the general public, how can I be best prepared to approach the application process to set my team apart from other applicants?
- From this application cycle, we can see what the state is looking for from businesses to build their cannabis market
- They want businesses that are set up for success
- A strong business plan, ties to the state and the community, and a strong equity plan to contribute to communities impacted by MJ prohibition.
- Begin property search
- Working with experienced teams like CLE we have experience in putting together competitive applications and developed a sense of what they will be looking for in their review
- We can identify the strengths and weaknesses in your business model and put together a strong complete application that meets the standards
22. How important is it for applicants to talk with the local municipality before applying to operate a cannabis business within its jurisdiction?
- They don’t want people reaching out to the local municipality until you’ve been selected to move forward to prevent a flood of people from contacting the local jurisdictions. Contact the local municipality once you’ve been approved and have your geographic region/location assigned.
23. What are some common pitfalls in the New York Cannabis industry?
- Not taking into account timing for licensing, retrofitting, or small details of operating your cannabis business
- The lead time and making sure materials arrive when they need to so the project keeps moving forward
- Make sure your contractors are communicating with all your partners throughout the partnership
24. What are the regulations for delivery methods and selling online in New York?
If you intend to produce cannabis at home and sell it online it’s not available to be done online. You cannot produce and sell THC-based edibles out of your home under any cannabis regulations within or outside of New York. According to the federal government, this is a form of narcotic trafficking.
What do I do after the New York Cannabis Application Process is over?
Following the application cycle selected applicants will have twelve months to complete the remaining application requirements to obtain final approval. Additional documents include submitting fingerprints and notifying the local municipality among others.
Are you ready? Consult with knowledgeable industry experts with a proven track record of success to ensure your application has the strength in what will undoubtedly be a competitive market.