As many fellow nutmeggers who have been following developments in the Cannabis space may be aware, state-sanctioned facilities are open for business. I wanted to write a quick note to comment on the rough (and painful) road ahead for those who may be trying to benefit from “ambiguities” (because there aren’t many).

There was a trend in NYC that is coming to a halt. The same thing is bound to happen in Connecticut. Without getting into the nitty-gritty, the thrust of it is simple.

Weed, Marijuana, Cannabis, Ganja, Herb, and whatever else you want to call the THC-based goods that get consumers “high” has been decriminalized for quite some time in Connecticut and other States in the Northeast, but it was on June 22, 2021 that decriminalization in Connecticut took a giant step – when Governor Lamont signed a law that made possession of, and gifting of cannabis completely legal (for adults over 21) 10 days later (July 1, 2021).

Not only that, but the bill laid out expectations and procedures for the licensing of weed stores and growers. It even provided for the regulation of people who work in these businesses.

But then – that was a year and a half ago. And since then, no one has been legally allowed to sell cannabis products in Connecticut. Including “Delta-8.”

Yet I did get the sense that I was seeing lots and lots of REAL weed and FAKE weed products being sold in gas stations and convenience stores. I fear for these business owners. While it may take a while for the government to catch up to them, they will. And when they do, it has the chance of being fairly painful for store owners who see others doing it and assume they can get away with it as well (see the NYC bodega story linked above).

The problem is that there is a significant incentive for businesses that followed all of the rules to get licensed, to report the unsanctioned sellers of weed. They are already going to be facing price competition from states like Massachusetts, where the industry is more mature (see below).

Average Weekly price of Marijuana (per ounce)Source: Massachusetts Cannabis Control Commission

There’s nothing they can do about that, but I’m certain they will look for ways to put the state to work to protect their moneyed interests against those who took “shortcuts.”

While gifting cannabis in Connecticut has been legal since July 1, 2021, and possession of quite a large amount has been legal for 1.5 years now, unlicensed “distribution” is still a crime. The good news is that if you run or work for a legitimate Cannabis business and are following all of the rules, you have nothing to worry about from the criminal side of things.

The bottom line is that in the interim, before legit shops opened. NYC had lots of pot bodegas, and now they are being shut down. It will take longer in Connecticut but when it happens to your store it could be ugly. It hardly seems worth the risk.

It isn’t worth the risk, because being shut down is only the start of the problem. Say you somehow manage to skirt criminal prosecution, you’ll still need to answer to the tax man. And will also be facing steep civil penalties from the Department of Consumer Protection.

Taxes on Cannabis are based on the THC content, and the price charged to consumers. It is estimated that this will total roughly 20% of the actual sticker price. If you run an unlicensed store, how are you going to navigate that when the DRS shows up?

Keep in mind that failure to pay/file/collect sales tax is its own independent crime, and sales taxes are not dischargeable in bankruptcy. Even further, unpaid sales taxes can be assessed against employees and owners of businesses PERSONALLY in the event the business cannot pay. Stated simply – if you are selling Cannabis/Marijuana without a license in Connecticut and you get caught, you may escape incarceration or criminal prosecution, and STILL be facing a “life sentence” of financial ruin and pain.

The way I see it, anyone trying to start an unsanctioned cannabis store is just asking for trouble. The only question I have is who is going to be doing the most enforcement? Will it be the Department of Consumer Protection? Will it be local, or State Police? Or will it be the Department of Revenue Services?

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