In No. 23 of the Cannabis Commerce + Chemistry Podcast, host Curt Robbins from Higher Learning LV and co-hosts John Bailey from the Mindset Genesis in Las Vegas and Dena Putnam from Leafwize Naturals in Orange County, California discuss a December 12, 2022 report about the impacts of New York's new adult-use cannabis taxes.
This fast-paced roundtable teaches listeners about the way in which New York's tax structure will impact consumer pricing and the underground ("legacy") market.
Bailey, Putnam, and Robbins discuss the significance of this report and ponder whether New York authorities considered the marijuana tax lessons learned from states such as California. Will New York's cannabis consumers pay nearly $80 for an eighth ounce of top-shelf cannabis? The report says no--because the same product will be available from the underground market for a significantly lower cost.
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Report: New York Cannabis "Going to be a Disaster"
A report released on December 12, 2022 entitled "New York's THC-Potency Excise Tax Analysis and Recommendations" that was authored by tax attorneys Jason Klimek from Barclay Damon LLP and James Mann from Lucosky Brookman LLP examined "the current tax structure in the New York State cannabis law and its impact on the burgeoning cannabis industry in the state."
The analysis concluded that the "out the door" cost of a one-eighth ounce loose-leaf cannabis product with 30 percent THC in New York will be $75.53, far above the price fetched by unlicensed underground ("legacy") vendors.
Green Market Report, a cannabis business media organization in New York, found "multiple easily accessible dealers" offering one-eighth ounce of marijuana for $10-45—significantly undercutting the rates of the predicted prices of the state's newly licensed cannabis sellers.
Consumers are Price Sensitive
This real-world price differential, say the authors of this report, may be the undoing of the emerging New York market for legal adult-use cannabis and cannabis products. "Consumers are very price sensitive in the cannabis space and will abandon the legal market in favor of the illicit market (or neighboring state markets) if the legal market cannot compete on price," noted the report.
"New York cannabis consumers would pay $12-52 for an eighth of marijuana, a far cry from the $75 predicted by this report."
No More Than 10-15 Percent
"Collected data suggests that consumers are willing to pay no more than a 10-15 percent premium over the illicit market (or neighboring state markets) to access state-legal cannabis," reported the paper. Thus, according to the street prices cited above, New York cannabis consumers would be willing to pay for an eighth of loose-leaf marijuana flower from $11.50 (supposedly for low quality) to about $52 (supposedly for premium quality with approximately 30 percent THC). This range is a far cry from the $75 legal market cost predicted by this report.
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