On August 19, 2021, the New Jersey Cannabis Regulatory Commission (CRC) approved the specially adopted rules governing the personal use of cannabis (the “Rules”). The rules apply until at least August 19, 2022.
The rules establish the recreational cannabis industry in New Jersey and allow the CRC to begin licensing businesses as soon as possible. The rules aim to promote social justice, safety and easy access to the cannabis market while keeping local communities in control of how cannabis companies operate in their jurisdiction.
The rules define different license classes for each stage of the supply chain. These classes include breeders, manufacturers, retailers, distributors, and delivery services. The rules also specify a micro-business license for each of these license classes. A micro-enterprise is defined as having no more than ten employees and an operating area of no more than 2,500 square meters. To encourage small business ownership in the New Jersey cannabis industry, the number of micro-business licenses available is not limited by the Commission and micro-business applications are prioritized over other cannabis business applications during the licensing process. In addition, micro-businesses pay 50% of the license fee for their class. The rules also create a path for Alternative Treatment Centers (ATC), previously licensed under the New Jersey Medical Cannabis Act, to expand their operations to include recreational cannabis.
What is important is that the Commission limits the number of breeder licenses it issues to 37 in the 24-month period after February 22, 2021. This number includes advanced ATCs, but not micro-enterprises. At the end of the 24 month period, the Commission will decide whether to increase the number of breeders to meet market demand. The Commission will determine an appropriate number of licenses to be issued in all other classes to meet market demand, but it is forbidden to limit the number of micro-enterprises in each class.
New applicants can apply for either a conditional license or an annual license. Conditional license applications are prioritized over annual license applications to prioritize small business ownership. To apply for a conditional license, all business owners must provide evidence that they earned less than $ 200,000 in the previous year, or $ 400,000 if registered together. Conditional licenses are less cumbersome to use and allow a company to begin the licensing process without having to figure out all of the organizational details. A conditional license gives the licensee a 120 day window of time during which they must gain control of the proposed site, obtain municipal approval, and develop a conditional conversion application to convert the conditional license into an annual license. After the conditional license expires, the company must have its conversion application approved in order to commence operations. After submitting the conversion request, the conditionally licensed company will be reviewed by the commission and will be granted an annual license if deemed acceptable. An annual license requires the applicant to have control of the proposed location, a city permit, and a detailed business plan at the time of application. An applicant for an annual license must also provide a summary operating plan that includes their experience and knowledge of critical aspects of the cannabis industry.
Individuals with a criminal record can qualify for a cannabis business license. As part of the application process, all applicants are required to submit a background check to confirm that they have not been convicted of a disqualifying crime. The scope of the disqualifying offenses is quite limited and includes: booby traps in manufacturing or distribution facilities, drug offenses involving minors (z), and offenses related to counterfeit drugs or medical devices. These offenses are also not exclusive if more than five years have passed since the date of conviction, satisfactory completion of the probation or probation period or release from prison and / or the person has given the commission clear and convincing evidence of rehabilitation.
There are two types of fees: registration fees and license fees. The application fees cover the cost of the application itself and are different for conditional and annual licenses. The license fees cover the costs of the initial license, which must be renewed every year. To promote small business, only 20% of the application fee is due at the time of application and is known as the submission fee. The other 80% is only due if the applicant is approved for a license and is known as the admission fee. Application fees are different for conditional and annual licenses, and conditional licensees must pay an additional fee to convert to an annual license. The annual license fees vary depending on the license class. ATCs must also pay a fee for permission to expand into recreational activities. The fee schedule is listed below:
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|License application type||Filing fee||Permit fee||Conversion request fee||Conversion approval fee||total|
|Conditional micro business application||$ 100||$ 400||$ 100||$ 400||$ 1,000|
|Standard conditional business application||$ 200||$ 800||$ 200||$ 800||$ 2,000|
|Annual license application for micro-businesses||$ 200||$ 800||N / A||N / A||$ 1,000|
|Standard annual business license application||$ 400||$ 1,600||N / A||N / A||$ 2,000|
|Test laboratory||$ 400||$ 1,600||N / A||N / A||$ 2,000|
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INITIAL / ANNUAL LICENSE FEES
|License type||Initial / renewal fee|
|Microbusiness operator||$ 1,000|
|Cultivator level I.||$ 5,000|
|Cultivator level II||$ 10,000|
|Cultivator level III||$ 20,000|
|Cultivator level IV||$ 30,000|
|Cultivator level V||$ 40,000|
|Cultivator level VI||$ 50,000|
|Micro enterprise manufacturer||$ 1,000|
|Manufacturers with premises of less than 10,000 square meters||$ 20,000|
|Manufacturer with premises of more than 10,000 square meters||$ 30,000|
|Micro business||$ 1,000|
|Test laboratory||$ 4,000|
ATC EXTENSION FEES
|ATCE extension type||Certification fee|
|Expansion of the medical cannabis grower||$ 400,000|
|Expansion of the medical cannabis manufacturer||$ 300,000|
|Expansion of the medical cannabis pharmacy||$ 100,000|
|Vertically integrated ATC with three pharmacies||$ 1,000,000|
|Vertically integrated ATC with two pharmacies||$ 900,000|
|Vertically integrated ATC with a pharmacy||$ 800,000|
The rules give the communities considerable control over shaping the cannabis industry in their jurisdiction. Municipalities can:
- Eliminate the recreational cannabis program entirely. At this point in time, roughly half of all New Jersey cities have gone this route, but these cities may change course later;
- Set numerical limits on the number of specific types of businesses operating in the jurisdiction;
- Limit cannabis business hours and locations, including banning cannabis businesses in school zones and placing restrictions on the proximity of cannabis businesses to playgrounds and places of worship;
- Create local licensing requirements and set civil penalties;
- Limit the crops that occur within the community; for example that all cultivation must be done indoors;
- Introduction of a 2% transfer tax on cannabis or cannabis products transferred by companies within the jurisdiction; and
- Notify the commission of the municipality’s preference for approval.
- Restrict the supply of cannabis items to consumers within their jurisdiction; or
- Restrict shipments of cannabis routed through your jurisdiction.
The rules address social justice by increasing opportunities in the recreational cannabis industry for people from legally defined target communities. Specifically, the rules provide for three types of priority licenses aimed at improving access to the cannabis industry for those who are legally disadvantaged or disproportionately affected by the war on drugs: (1) socially involved companies, (2) Variously owned companies; and (3) Impact Zone businesses. These companies all get priority over all other types of applicants during the admissions process.
(1) Social Equity Firms. The rules define a social equity company in two ways. The first option is to qualify if the majority of the ownership interests are held by one or more individuals who have lived in an economically deprived area for five of the last ten years and whose household is 80% or less of the median median household income of New Jersey . The second route is when the majority of the property is held by a person or individuals convicted of at least one cannabis-related crime.
(2) Different owned companies. A variably owned corporation is one in which the majority of the ownership interests are held by either minority, women, or disabled veterans. An additional requirement for the diversity owner operating title is that the management and day-to-day operations must be controlled by at least one of the owners who are qualified as diversified.
(3) Companies in the impact zone. An impact zone is a community with a large population that contributes to a higher concentration of law enforcement activity, unemployment, and poverty due to past criminal cannabis companies. An Impact Zone Company is a company that operates in an Impact Zone and has an owner or owner who controls the majority of the ownership interests that are located in an Impact Zone and for at least three consecutive years prior to the date of application were resident there.
The rules also create a social justice excise tax on the sale or transfer of usable cannabis by one cannabis grower to a cannabis establishment other than another cannabis grower at 1/3 of 1% per ounce. The income from this tax is used for promoting education, economic development and social support services in communities that are designated as zones of activity.
Special contribution by Cannabis Legal intern Zac Weiner
 Half of New Jersey’s cities are on the verge of banning cannabis businesses – Gothamist