Breaking Down SB1201 a.k.a. The Cannabis Bill (Taxes And Revenue)

July 21, 2021

Possession of cannabis – marijuana - by adults age 21 and older became legal in Connecticut July 1, 2021. Criminal laws prohibiting possession have been repealed. Adults (21 and older) can have up to 1.5 ounces of cannabis on their person, and up to 5 ounces stored in their homes or locked in their car or truck.

Governor Lamont signed the act on Tuesday, June 22, 2021SB1201 (also known as Special Session Public Act 21-1) passed the General Assembly with my support, and 64 % of the people of Connecticut. It is a comprehensive plan with careful regulation over a significant time span. Retail sales won't start until the summer of 2022. Home growing won't be allowed before July 1, 2023.

This is the last in a series of emails I wanted to share with you about regarding tell you what the new law does because there are some noteworthy layers of the law that both proponents and opponents should be clear on and understand.

Today, I’ll focus on what the legislation does with respect to one of the key drivers of our actions: taxes and revenue.



The taxes: Three taxes will be imposed on the new cannabis market, which collectively, will reach an approximate effective tax of 20 percent at the beginning of the market which will include the normal sales tax of 6.35 percent, a 3 percent sales tax for the host municipality and a tax - charged at retail - depending on the THC (tetrahydrocannabinol) content of the product. 



The revenue: Beginning in 2024, 60 percent of the THC tax will go into the Social Equity Fund and 25 percent will go into a new Prevention and Recovery Fund, specifically for funding public health measures. The Social Equity Fund percentage increases to 65 percent in 2027 and 75 percent in 2029.



The taxes result in a total revenue gain to the state and municipalities of $4.1 million in Fiscal Year 2022, $26.3 million in FY 23, and $44.6 million in FY 24; the annual revenue gain is expected to grow to $73.4 million by FY 26.

SB1201 (TAXES AND REVENUE)

The bill repeals tax penalties and liens associated with illicit cannabis distribution. This repeal removes tax penalties that were added during the "War on Drugs" that has proven to be ineffective and quite expensive to enforce.



SB1201 extends an existing angel investor tax credit to 40 percent of cash investment in a cannabis bill, capped at $500 per investor (an angel investor is a person who provides capital for business start-up).

Furthermore, the bill authorizes $50 million in bonding for low-interest loans to equity applicants, municipalities, and 501(c)(3)s for renovation/development of property, capital support for equity applicants, funding for the accelerator program, and funding for the workforce training program and it also creates a joint DECD (Department of Economic Development)/Central Connecticut Cooperative revolving loan program for social equity applicants.