Leaders of cities, towns and villages across New York are meeting this summer and fall to determine if they should allow marijuana sales within their municipalities, and also if they should allow “consumption sites,” places where people can come and smoke, like pubs but with pot instead of alcohol.
Discussions often revolve around the tax revenue to be generated from the sales.
Although the state says that localities can expect $75 million statewide per year in revenue, neither Saratoga nor Warren counties have estimated how much money may come their way.
There are too many variables at this point to know how to estimate that number, Don Lehman wrote in an email. He is the director of Public Affairs for Warren County and was echoing what others in the county reported to him. Saratoga County’s Deputy County Administrator, Ridge Harris, also wrote that his county had not yet developed an estimate. As well, Mark LaVigne of the New York State Association of Counties said his group has not completed these estimates.
Looking at the variables helps to show why an estimate is tough.
A quick average would be to simply divide the state's estimate between each of the 62 counties, with each getting $1.21 million of that original $75 million. But that is simplistic.
For starters, each county will get a portion of the taxes based on sales in that county. Since the regulations surrounding the sale of pot are not yet complete, no one can legally sell, so no one has a sales number to base the estimate upon. The state's estimate comes by extrapolating data in other states that have already legalized recreational use and applying it to New York's demographics.
Larger counties most likely would generate more than smaller counties and therefore get more revenue. Travel from other states into tourism-heavy areas could affect sales. Commuiting between counties could even affect sales, according to estimates on New York State's websites.
The tax on pot at the point-of-sale has been set at 9% for the state and 4% for localities. That 4% goes first to the counties. The counties keep 1% of the 4% (or, one-quarter of the revenue) and dole out the rest to each locality proportional to their overall sales.
Taking that simple average once again, each county's share of $1.21 million would mean $302,500 to the county while the remaining $907,500 splits between various localities. The 13 inside Warren would each get about $69,807. Saratoga’s 30 would get $30,250 each.
Of course, no county is average, and this is why estimating is so difficult. Counties and the towns and villages within them are of various sizes and would therefore generate different level of marijuana sales.
The more marijuana a town or village sells, the more money they get back. But it is a tough number to estimate.
Localities may opt out of sales—as Watertown in Jefferson County did last week—and they get none of the money generated in the county because of that decision. That is, there are no legal sales in Watertown, so there is no tax coming back.
The other localities in Jefferson County that opt in will share three-quarters of Jefferson County's revenue. How many localities will opt out of the program in any county is still unknown and that data will shift the estimate.
Another wrench in the estimate is this: a town could opt in, but no one moves in to sell. A retailer might choose to open shop in a city inside the town. What does the town get?
Either 50% of the city’s take or another number that the city and town agree to.
What about the opposite? The town and city both opt in, but the city gets no retailer while the town does. Will the town owe the city a dime?
No.
However, they could work something out, the law says. Again, this throws a wrench in any estimate one might try to conceive for an individual locality.
The Association of Towns' report summarizes the possible outcomes:
- Town opts out, but village within town has sales = town does not get revenue
- Town does NOT opt out [ie: they opt in] and the village within town has sales = revenue from village sales is split pursuant to an agreement or, by default, 50/50
- Town does NOT opt out, the village DOES opt out, and sales take place within town = town gets revenue, does not have to share with village
- Town does NOT opt out, the village does not opt out, but retail sales only take place in town = town gets revenue, does not have to share with village.
The final difficulty is that the regulations for all of the sales and distribution have not been finished, so some of these details could change.
Editor's Note: The rules here are taken from a number of reports produced by the New York State Association of Counties, the Association of Town of the State of New York and from the Office of Cannabis Management. Technically, localities may only "opt out" of sales and consumption sites because the law says any locality that does not act will be a part of the system automatically. Still, we are using the term "opt in," meaning they did not opt out. We also refer to "tax." Although we are talking about point-of-sales tax, generally thought of as sales tax, the state refers to it as excise tax.