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Cannabis Control Commission
ATTN: Director of Constituent Services
Union Station, Worcester
RE: Draft Revised Regulations: 935 CMR 500.00 Adult Use of Marijuana
Dear Chair Hoffman and Members of the Cannabis Control Commission,
On behalf of the cities and towns of the Commonwealth, the Massachusetts Municipal Association is writing to offer comments on the draft revised Adult Use of Marijuana regulations (935 CMR 500) specific to delivery.
In order to serve the public as effectively as possible, cities and towns need effective and workable regulations governing the use of marijuana in Massachusetts. Municipal officials are on the frontline of implementing Chapter 55 of the Acts of 2017, and have a responsibility to ensure that it is done in a balanced way that maximizes the benefits of this industry, while providing appropriate consideration and weight to health and safety concerns, and possible adverse impacts on residents, businesses, neighborhoods, economic development plans, and other important factors.
We offer the following comments and look forward to working closely with the Commission toward safe, workable and effective regulations.
Marijuana Wholesale Delivery License Should Not be Adopted
The MMA is extremely concerned with the definition of marijuana wholesale delivery license within the draft regulations under 935 CMR 500.002, specifically that a marijuana wholesale delivery license is not considered to be a Marijuana Retailer. According to the enabling legislation, a marijuana retailer is the only marijuana establishment that was contemplated to deliver marijuana or marijuana products directly to consumers. To date, no delivery license has allowed direct-to-consumer sales of marijuana. Within existing regulations, the limited delivery license requires a delivery agreement or contract between a marijuana retailer and marijuana establishment with a delivery endorsement or a delivery licensee before marijuana can be sold directly to consumers. A limited delivery license holder cannot sell directly to consumers without that contract. Even marijuana retailers themselves cannot deliver directly to consumers without a delivery license. However, this new license type would allow license holders “to wholesale and warehouse finished marijuana products acquired … and sell and deliver … directly to consumers” (emphasis added). The expansion of the wholesale delivery license within this newest iteration of regulations is not in line with the existing regulatory definitions and is seemingly in direct conflict with the statutory framework.
Although the definitions section of the draft regulations attempts to distinguish the wholesale delivery license from a retailer, under 935 CRM 500.050 a wholesale delivery license is considered to be a marijuana retail license for the purpose of determining license cap limits for entities so that no more than a combined total of three licenses can be awarded. On the other hand, when it comes to municipal control, although the wholesale delivery licensee could sell directly to consumers acting essentially as a retailer, municipalities would not be able to count those licensees against their retail cap if they have one. If it is difficult to square the different delivery licenses within the Commission’s own regulations, imagine the difficulty municipalities would have as they attempt to determine how these new licensees would fit within their existing bylaws and ordinances.
Municipalities are also rightfully concerned about the implications this new license type would have on their retail licensees. While we understand that there would be at least a three-year exclusivity period for businesses controlled by and with majority ownership comprised of Economic Empowerment Priority Applicants or Social Equity Program Participants, we would urge the Commission to consider moving forward with just the limited delivery license so that the Commission can better understand the interplay between the delivery license and the retail license before taking any further action. The Commission does not yet know how the market may react to a delivery license and we believe it would be prudent to take the time necessary to understand the disruptions this may have on the retail market before greatly expanding the license to include wholesale delivery. Many communities have welcomed recreational marijuana shops, and it would be a shame to see those shops close so early on in the recreational marijuana industry in Massachusetts.
Tax Implications of Delivery
Before voting on the proposed changes to delivery licenses, the MMA respectfully and strongly urges the Commission to first connect with the Department of Revenue (DOR) to understand how definitional changes may affect taxation. With the further proposed expansion of a delivery license to include wholesale delivery, municipalities may be faced with a significant loss of tax revenue from their existing retail shops as sales at those locations drop. Further, while deliveries may increase in communities that do not have brick-and-mortar retail shops open within their borders, those communities may not receive any tax benefits from those sales but may see increased impacts from traffic. Additionally, it is unclear how taxation would work with wholesale delivery and which community would receive the tax benefits of a sale. Prior to a final vote on these regulations, we urge a deeper examination into these discrepancies, and call on the Commission to work with the DOR to protect the tax revenue envisioned in the statute, and to provide additional guidance to communities on the taxation of sales by delivery licensees so they can provide that information to those citizens concerned with increased impacts of delivery.
Delivery Should Amount to a Substantial Modification to an Existing License
Under 935 CMR 500.002 a substantial modification “means a material change to a term of a contract that a reasonable person would understand alters the relationship between the parties.” In certain cases, marijuana establishments would be required to go back to the Commission to notify them of substantial modifications or changes. A substantial modification to an existing license type to allow delivery would be a substantial modification of business operations. At the time that retail marijuana establishments entered into host community agreements or held community outreach meetings, they may not have contemplated delivery. In many cases, the delivery license may not have even been in existence. However, the operation of delivery at a retail establishment may look very different than the simple consumer traffic the community originally contemplated. This may be particularly true in dense urban areas where there is no nearby parking and consumers ordinarily have to be shuttled in to access the retail store. A retail establishment could have delivery drivers parking outside in order to pick up deliveries under the draft framework. In addition, with the proposed expansion of the wholesale delivery license, there would be increased traffic at cultivators and manufactures that communities would certainly not have contemplated prior to this change.
With the potential that delivery could expand very quickly, even within the exclusivity period, we strongly believe that the marijuana establishment where products can be acquired for delivery should be required to notify the community of this substantial modification in their business operations to allow communities to alter any local license or regulations needed to account for this change. Understanding the reasoning behind the exclusivity period, the onus should be put on the marijuana establishment where the products are to be acquired instead of the delivery licensee to complete this step. Ultimately it is the marijuana establishment where marijuana or marijuana products are being picked up whose business operations are changing to account for delivery. We urge the commission to add this necessary step to the regulations.
MMA Commends Comments from the Municipal Legal and Public Safety Community
In addition to the issues raised in this letter, the MMA also supports comments and recommendations from the Massachusetts Municipal Lawyers Association and municipal public safety officials. It is the MMA’s hope that these regulation amendments will be developed and implemented in a deliberate way to ensure balanced and long-term stability and success for all stakeholders. We are a willing partner and resource for you as you finalize these important changes.
Thank you for the opportunity to submit comments regarding the draft regulations. If you have any questions, please do not hesitate to have your staff contact me or MMA Senior Legislative Analyst Brittney Franklin at 617-426-7272 or bfranklin@mma.org at any time.
Thank you very much.
Sincerely,
Geoffrey C. Beckwith
MMA Executive Director & CEO