Washington cannabis regulators release reminder about “pay-to-play”
By Kaitlin Domangue
The Washington State Liquor and Cannabis Board (WSLCB) released an update last week about “pay-to-play” terms.
Processors are paying for shelving space – or an ideal spot on the shelf – and this is illegal in the Washington cannabis industry.
“RCW 69.50.328 establishes the tier system in Washington’s regulated cannabis industry that prohibits cannabis processors from having a direct or indirect financial interest in a cannabis retailer,” the WSLCB’s memo reads. “Paying a retailer to promote a processor’s product creates a financial interest between the non-retail and the retail business. Furthermore, under WAC 314–55–018, no cannabis Industry member may enter into any agreement which causes undue influence over another cannabis licensee or industry member.”
This practice isn’t known as “pay-to-play” everywhere, which tells you exactly how Washington regulators feel about this practice. Other states and industries call them slotting fees or shelving fees.
Slotting fees in cannabis
“As much as I hate to say it, this is a normalization of cannabis in the mainstream retail market model,” said George Sadler, co-owner of San Diego-based cannabis brand Gelato, with products in Michigan. “Grocery stores and retail outlets have established this practice for years. It is unfortunate, but it is a reality.”
Not for Washington cannabis retailers, though. And this law doesn’t just extend to cash.
Gifts, discounts, money loans, premiums, certain free products, and “treats or services of any nature” are also prohibited under the state’s pay-to-play terms for cannabis businesses.
TLDR: Washington dispensary shelf space is authentic af and each one of those brands earned its spot.
Much of the cannabis industry doesn’t agree with slotting fees because smaller brands struggle to compete. But unless there are strict laws like Washington has: shelving fees are hard to avoid inside the cannabis industry and out of it.
And for the brands who can afford to put up the extra cash: strategically leveraging premium shelf space can be a great way to get in front of the consumer.
New Jersey cannabis operators might see state tax relief
Finally. Some headway against the beast known as tax code 280e.
The New Jersey Assembly approved a bill last Thursday that would allow cannabis business operators in New Jersey to deduct certain business expenses from their taxes that currently are not allowed because of 280e.
The bill now heads to the Senate for consideration.
Of course, operators would still be required to pay federal taxes under tax code 280e, but this bill would provide state relief.
This move will “result in an indeterminate annual loss of revenue” for the state of New Jersey, according to a report released last month.
Yeah. That’s kinda the point.
Cannabis business operators suffer because they pay so much in taxes, but New Jersey is not suffering and won’t be suffering just because of a loss in cannabis tax revenue.
The state will still receive revenue from cannabis sales taxes, which climbed over $4 million in the first ten weeks of recreational cannabis sales.
The Office of Legislative Services (OLS) did say that “providing access to these deductions and credits may also help generate more economic activity by cannabis businesses [and] the State and local governments that tax cannabis businesses might indirectly realize an indeterminate amount of additional annual revenue.”
This bill still needs to pass the Senate, but it cleared the initial chamber with a 60-0 vote – signaling its legislative strength.