Maine now expects retail marijuana stores won’t be open until June

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Maine is planning to have its first recreational marijuana shops open in June, three months later than expected. State budget forecasters are banking on a robust kickoff, however, estimating $5 million in sales by the end of the month.

Maine is “very close” to issuing the first round of conditional recreational business licenses, said Erik Gundersen, the director of the Office of Marijuana Policy. It has received 197 applications so far; 80 of which have been deemed complete enough for regulatory review.

But a conditional state license is just the first step in a three-stage licensing process. The applicant must obtain local authorization, which can take anywhere from two weeks to a year depending on the municipality, before the business can return to the state to obtain a final active license, Gundersen said.

Maine won’t issue active licenses until it has a testing lab ready, with all its licenses and certifications, to run the health, safety and potency tests required under state law, Gundersen said. Currently, four labs are considering whether to enter the Maine market, but only one is close to being fully licensed.

Nelson Analytical in Kennebunk is waiting on municipal approval in April before it can be ready to test. Gundersen predicted the other three labs will be fully operational by the end of the summer. Gundersen told state forecasters Friday that he believed a single lab would be enough to handle initial testing needs.

To avoid a rush on one or two shops, the state will wait until there are enough fully licensed retail shops ready to operate before it finally allows them to begin selling to consumers, Gundersen said. He wouldn’t say how many shops need to be ready for the state to set a launch date, but expects it will occur in late spring.

“(That) will allow product to go through the mandatory testing regime, go through the manufacturing process and allow retail stores to fully stock their shelves with a wide array of products,” he said. “Hopefully, (we’ll) get enough products into the system to withstand the first day, the first weekend, the first week of demand so we don’t have a shortage like we’ve seen in other states.”

After discussions with the Office of Marijuana Policy, the state revenue forecasting committee changed the date it expects to receive the first sales tax revenue from recreational marijuana from mid-March to mid-June, said chairman Michael Allen, Maine’s associate commissioner of tax policy.

The delay has prompted Maine to lower how much sales tax it expects to get from adult-use cannabis in fiscal year 2020, which ends June 30, from $2.2 million to just $500,000. Given a retail cannabis tax of 10 percent, forecasters are banking on $5 million of marijuana sales in about two weeks.

While that may sound like a lot, compare it to the $3.2 million that Illinois collected on its opening day of marijuana sales last month, or the $440,000 spent at Massachusetts’ two recreational retail shops on opening day there. The number of retail shops has risen in the Bay State, and it now has a million-dollar-a-day market.

While Maine is a smaller market, medical marijuana is already a brisk business here. In 2019, medical marijuana sales averaged about $10 million a month, according to state tax revenue data. And that is a market with a customer base restricted to card-carrying patients; recreational pot will be open to those 21 years of age or older.

On Friday, state forecasters described the growth of medical marijuana sales as “super-normal.” While some of that can be attributed to increased compliance, with mom-and-pop stores wanting to show tax compliance to get an adult-use license, Allen thinks most of it is real growth that he expects to continue.

Given the three-year delay in legalization, economists say there is certainly a pent-up demand for Maine to begin adult-use sales. Marijuana gifting services – where someone gets an ounce of cannabis as a gift for buying a $235 T-shirt or mug – operate freely in many Maine cities.

The committee is standing by its estimates of recreational cannabis sales in future years: $84 million in fiscal year 2021, $118 million in fiscal year 2022 and $166 million in fiscal year 2023. It also is standing by its excise tax revenue projections, which stem from a 10 percent tax on the wholesale market.

National marijuana consultants predict that many of Maine’s medical marijuana patients will move into the recreational market once it goes live, as has happened in other states where both kinds of marijuana are legal, but state budget forecasters aren’t considering that factor yet, Allen said.

Maine Revenue Services will spend the summer beefing up its marijuana forecasting model after it has a few months of sales data to review, he said. Its current forecast is based on first-year sales in Colorado and Massachusetts, factoring in differences in population and marijuana consumption rates.

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