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Possible changes to New Mexico’s cannabis tax structure may be on the horizon as the state’s newest industry continues its upward trend in adult-use sales.
State officials and industry leaders had a wide-ranging discussion on Thursday as part of the Revenue Stabilization and Tax Policy Committee meeting, touching on water use, plant counts and cannabis taxes. The meeting came just a day before revenue numbers for September were announced in what proved to be another record-breaking month for recreational sales, which stood at $24.2 million.
The September adult-use sales number was about $11,000 higher than in August, according to Cannabis Control Division data. That made it a third straight month the state’s newest industry has seen a record-high.
But the state’s overall sales numbers – which include medical cannabis sales – stood at $39.7 million in September, about a million dollars less than the previous month. That drop off came on the medical side, which did $15.4 million in sales compared to about $16.4 million the previous month, according to data from the Cannabis Control Division.
Mark Chaiken, director of tax policy for the New Mexico Taxation and Revenue Department, discussed with lawmakers on Thursday where cannabis excise taxes currently stand.
In his update, he said cannabis excise taxes have totaled about $10.4 million when you include preliminary data from August. About two-thirds of the money goes to the state’s general fund, with about a third going to local governments, he reminded lawmakers.
But the discussion also touched on the confusion of cannabis taxes and possible changes to them in the next legislative session.
Matt Muñoz, the chief innovation and financial officer of Carver Family Farm, a cannabis microbusiness based in Albuquerque, told lawmakers it is likely he will owe money in back taxes from a period of time in which his business was applying them incorrectly.
Businesses in April, and in the months after, were combining the cannabis excise tax and gross receipts tax into one – something TRD later said was wrong. For instance, a cannabis product of $100 would get a 12% cannabis excise tax that would bump the product up by an additional $12. Then, businesses would add GRT on top.
“When we see a new tax program like this, there can often be issues with compliance early on that we need to get worked out,” Chaiken said. “We’re trying to get everyone on the straight and narrow, but there can be variations in the data until people adapt to the new tax program.”
Rep. Javier Martínez, D-Albuquerque, said he believes legislators next year should take a look at changing the tax scheme for the cannabis industry, saying “pyramiding the tax was never the intent.”
“I said it in 2021 and I’ll say it again: there’s always room for improvement,” Martínez said of possible legislative tweaks. “… It could always be better.”
Breaking down the numbers
Retailers in Albuquerque, the state’s largest city, made about $7.9 million in recreational sales last month, according to CCD. That’s a drop off of about $94,000 from the previous month.
On the medical side, Albuquerque’s sales figures stood at about $6.2 million – a drop off from the previous month of about $405,000, according to the CCD data.
Santa Fe made about $1.8 million in sales in September, down from about $1.9 million in August.
And Las Cruces, the largest city in southern New Mexico, did nearly $1.7 million for the month. But that was a significant drop off from the previous month and translates to a loss of about $154,000.
Sales in southern New Mexico remain relatively high still.
Sunland Park, which sits directly on the southern border of Texas, did about $1.3 million in recreational sales in September and, in fact, increased sales on that end by about $20,000.
Hobbs did nearly $1.4 million in adult-use sales and increased those sales by about $95,000 from the previous month. Carlsbad brought in $817,499 and Clovis brought in $703,361, according to the data.