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SB 13 CANNABIS REGULATION ACT

Current Location: STBTC
Referrals: STBTC/SJC

[3] STBTC/SJC-STBTC

SB 13 PDF  |  SB 13 FIR


Scheduled on - Date:  Time:   Location:

2/01/2021 [3] - Sent to location Senate Tax, Business and Transportation (STBTC)
Synopsis:

 Senate Bill 13 (SB 13) enacts the Cannabis Regulation Act and legalizes, regulates industry, and taxes recreational marijuana for people 21 or older. SB 13 imposes a 20% sales tax on cannabis sales.

Analysis:

 Senate Bill 13 (SB 13) legalizes the recreational use of marijuana for people 21 years old or older and allows the state to tax marijuana sold in licensed stores. The bill establishes a licensing system for private cannabis businesses and imposes a 20% sales tax on cannabis.  

The specifics of the bill are as follows: 

1. The bill creates the Cannabis Regulation Act (Act) and the Cannabis Regulation Division (Division) of the Regulation and Licensing Department (RLD).  The Division regulates and administers commercial cannabis activity and the medical cannabis program. By July 1, 2022 or earlier by executive order, the Division must create rules including license issuance, security for establishments, product labeling, and advertisement. 
2. In consultation with the New Mexico Environment Department (NMED), the Division must establish health and safety standards and quality control standards for cannabis products.  NMED rules must establish packaging requirements, labeling requirements, and assuring nicotine is absent.  
3. In consultation with the NM Department of Agriculture (NMDA) and the NMED, the Division must establish rules regarding use of pesticides, environmental protections, compliance with environmental laws, and occupational health and safety standards for employees in the cannabis industry.  
4. The Division and NMED must establish rules governing cannabis manufacturer licenses and cannabis testing laboratories. Cannabis products may not be sold unless a sample of it has been tested by a cannabis laboratory to determine whether the chemical profile conforms to its label.  The cannabis product must also be void of harmful levels of contaminants.   
5. The Division must create a Cannabis Policy and Regulatory Advisory Committee (Committee) to advise the Division on the development of these rules, focusing on promoting economic and cultural diversity as well as protecting public health and ensuring that legal cannabis does not perpetuate the illicit market for cannabis.  The Committee consists of 15 members appointed by local and state polities.  The Committee must publish annual reports on its recommendations, including whether to adjust the cannabis excise tax and convene biannual public meetings. 
6. Working with the Division, the Department of Health (DOH) is required to establish a Medical Cannabis Program to meet the needs of patients. Additionally, DOH must create a Medical Cannabis Assistance Program and into which deposits will be made from portions of the Cannabis Excise Tax Revenue. SB 13 creates the Low-Income Medical Patient Assistance Fund.  This program will provide medical cannabis to sick and indigent NM residents. Annual reporting is required.
7. The bill requires that Department of Public Safety (DPS) in conjunction with the courts publish reports regarding cannabis activity. Such reports detail cannabis-related violations along with demographic data.
8. The Division must begin issuing licenses by July 1, 2021 for: commercial cannabis, personal production activity and medical cannabis program.  Licenses include cannabis couriers (a person who transports cannabis directly to consumer); testing laboratories; manufacturers; microbusinesses (which operate only one business and can produce up to 99 plants); producers; and retailers.
9. Licenses can only be issued to persons (in the case of an entity, 60% of controlling persons) who have had continuous residency in New Mexico for at least two years.  This residency requirement does not apply to licenses for personal production, research and testing labs, and Lynn and Erin Compassionate Use Act (LECUA)
10. Those currently licensed in good standing under LECUA are to be issued a license under this Act to continue to conduct medical cannabis activity only, and the division may issue them a temporary license to conduct commercial cannabis activity so long as the business has the financial and operational ability to engage in commercial cannabis activities. Commercial cannabis activities may also receive a transitional license. All others cannot sell or trade in cannabis products prior to 2022. 
11. The Division must begin to accept commercial and medical cannabis license applications by SB 13’s effective date and must issue or deny a license within 45 days of receipt of the application. Occupational licenses must be applied for by a person undertaking cannabis activities. The Division must issue or deny an application within 10 days.
12. Applications may be denied if: (a) the applicant or controlling person in the entity has been convicted of an offense substantially related to the qualifications, functions or duties of the business (i.e. fraud, deceit, embezzlement, hiring underage persons to engage in controlled substances); or (b) the applicant has had a medical cannabis license revoked in the past three years.  However, the Division has discretion to review the conviction and any rehabilitation of the applicant, and convictions relating to controlled substances are not to be the sole ground on which to deny a license.  
13. The Division is allowed to determine license fees, but such fees must be scaled to reflect the size of the business. Licenses are non-transferrable.
14. Violations of the Act may be punished by the Division through a rule-established sanction; suspend or revoke licenses; impose a plan of correction; or assess a civil penalty up 
15. Contracts related to licensees are not enforceable on the basis that the conduct is prohibited by federal law.  
16. The bill permits the following personal use of cannabis for those over 21: consuming cannabis products; possession or transferring without financial gain no more than two ounces of cannabis or 16 grams of cannabis extracts; up to three mature female plants and six male immature plants and/or six seedlings. A person who exceeds these amounts are guilty of a misdemeanor (for between 2 and 8 ounces of cannabis or between 16 and 64 grams of cannabis extracts); a fourth-degree felony (for more than 8 ounces of cannabis or more than 64 ounces of cannabis extracts). A minor (under 18) who possesses the above possession limits is subject to a $500 fine. A minor who exceeds limits will be considered a delinquent offender and require court action. Smoking or using cannabis in public is not permitted. 
17. The bill eliminates the crime of possession of drug paraphernalia, and specifically allows for possessing, using, displaying, purchasing, manufacturing, or giving away to a person 21 or older cannabis paraphernalia. 
18. Adherence to personal use regulations does not constitute grounds for detention, search, arrest, violation of parole or probation, or seizure. SB 13 provides that certain acts do not constitute reasonable suspicion of a crime (odor of cannabis, possession of cannabis without evidence it exceeds legal limits).  This does not apply to officers investigating DWI or operating a watercraft while intoxicated. 
19. Those who smoke cannabis in a public place (except in a cannabis consumption area) or produce cannabis in public view are subject to a $50 civil penalty.  Smoking does not include the use of an electronic smoking device. 
20. The bill prohibits a person without a license from distributing cannabis. Violators who are under age 18 are given a which is a $100 fine, educational classes, and community service or restorative mediation.  Violators over age 18 are guilty of a misdemeanor; the offense is a fourth-degree felony if the unlicensed sale was done from a storefront.  
21. Possession or distribution of cannabis on the grounds of a school, church, or daycare (unless a qualified patient or their caregiver) is a misdemeanor. 
22. Possession of cannabis from those 18 to 21 is a subject to a $100 fine and educational classes and community service or restorative mediation. Possession of cannabis by a person under 18 is subject to a fine of $50 and the above sanctions.  
23. The unlicensed production of cannabis and extracts is a fourth-degree felony (unless under the medical marijuana act.  
24. The bill creates the Cannabis Regulation Fund to be administered by the Division and support the Division in its duties with the Act.  
25. The bill enacts the Cannabis Tax Act and imposes a Cannabis Sales Tax. The rate is 20% of the price paid for the cannabis product. The state rate is 13% and local government is 7%. Municipalities and counties each will receive 35% of tax revenue collected on retail sales within its boundaries. This tax does not apply to retail sales of medical cannabis products sold to qualified patients. Taxes imposed under LECUA or this Act is not a Gross Receipts Tax (GRT) and the receipts are to be deducted from GRT and Governmental GRT.
26.  Licensed cannabis businesses cannot deduct expenses for gross income since they are “trafficking” cannabis, a Schedule I controlled substance. Credits are prohibited as well. 
27. The bill amends numerous sections of law to comport with the changes created by the Act, such as eliminating references to marijuana and hashish as a controlled substance in the criminal code (possession or distribution of synthetic cannabinoids is still a crime) and possession of drug paraphernalia.  
28. The Division must collect and publish a report with aggregate data.
29. Finally, the bill repeals Sections 9-7-17.1 (Medical Cannabis Fund).  

Amendments:

Current Law:Currently, the sale of cannabis is only permitted to those in possession of a medical cannabis card; otherwise, criminal penalties are imposed for the possession or distribution of marijuana and for the possession of drug paraphernalia.