DeSantis wants clay companies to pay more to do business in Florida

TALLAHASSEE – As Florida’s medical marijuana companies continue to be flush with cash, Gov. Ron DeSantis said this week that cannabis operators should pay more for the opportunity to do business in the state.

“The state needs to charge these people more,” DeSantis told reporters Tuesday.

“I mean, these are very important permits,” the governor said. “I would pay them an arm and a leg. I mean, everybody needs these licenses.

It was unclear whether DeSantis was referring to medical marijuana companies already operating in the state or businesses looking to enter Florida, which insiders say could be one of the nation’s strongest cannabis markets.

While DeSantis wanted to take more money out of the businesses, the governor helped direct more money in one of his first legislative pushes after taking office in January 2019.

After voters approved a constitutional amendment in 2016 legalizing medical marijuana, DeSantis urged lawmakers in the Republican-controlled Legislature to repeal the ban on smoking marijuana.

The Legislature quickly went along with DeSantis’ request, and whole-flower products are now the most popular items in the state’s more than 460 medical marijuana dispensaries.

DeSantis’ comments this week on Medmen Enterprises Inc. It coincided with the closing of a $67 million deal to sell its Florida operations to Green Sentry Holdings LLC.

With nearly 800,000 licensed medical marijuana users among Florida’s more than 22 million residents, investors are eagerly awaiting the opportunity to plant a stake in the state.

But the DeSantis administration, which now has 22 licensed operators, has dragged its feet in complying with a state law requiring the Department of Health to double the number of players in the industry.

The governor’s office blamed the delay on litigation over the 2017 law, but a Florida Supreme Court decision upholding the law was finalized last year.

The 2017 law created a framework for the medical marijuana industry and set a schedule for new licenses to come online as the number of licensed patients increases. Under the law, state health officials had to issue at least another 22 permits to monitor the patient population.

Medical marijuana companies operating in Florida In 2015, they were part of the first group of applicants to pay more than $60,000 for a shot to sell low-THC cannabis. In the year Those applications came after lawmakers approved low-THC products for certain patients in 2014.

The 2016 constitutional amendment supersedes the 2014 law. After the amendment was passed, nearly all operators who were allowed to add undiluted THC levels of medical marijuana to their product lines changed hands after the licenses were first issued.

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Companies pay $60,000 every two years to renew their licenses, which regularly do more than $40 million in business.

“Why don’t we use this opportunity to make money for the government?” DeSantis said Tuesday. But I think that would require a statutory change (by the legislature) and I don’t think we can do that through administrative rule alone.

For all businesses participating in the program, Florida law requires legislative approval if regulatory costs exceed $200,000 in one year or $1 million over five years.

The governor pointed to a section of the 2017 law that limits how much the Department of Health can charge companies for licenses and renewals. The law only allows the state to make payments to cover the medical marijuana program, as well as research programs and public health campaigns.

The law gave health officials the ability to establish a “supplemental license fee” to help cover the program’s costs, but the health department never authorized such fees.

Brady Cobb, an attorney who is the founder and CEO of Green Sentry, said in a phone interview this week that raising application and renewal fees “would be tragic.”

“If it happens, it will happen,” Cobb said, adding that the state could make more money by taxing marijuana products or allowing operators to sell wholesale to each other and taxing those sales.

In the most recent round of licensing for the Black Farmer Act of 2017, the state charged a hefty fee. Under the Health Department’s rules, applicants had to pay a $146,000 fee to apply for a black farmer’s license — more than double the application fee in 2015.

The department received 12 applications for black farmer licenses over a five-day period in March, but did not announce the winner of the license. The agency did not respond to questions this week about when the permit would be issued.

The state has not set a deadline, though the department is expected to begin a new round of license applications after the black farmer license is finalized. At least 150 hopefuls – and possibly twice this number – are required to apply.

While DeSantis argues the state isn’t charging enough for licenses, Florida’s license and renewal rates cover those in most other states.

But because of the way the state’s medical marijuana industry is structured, said Sally Kent Peebles, a partner at Jacksonville-based national cannabis law firm Vicente Cederberg LLP.

Florida licenses are “considered the most valuable licenses in the world,” Peebles told The News Service of Florida this week.

Their prices depend in part on the state’s licensing system, which requires operators to produce, process and sell marijuana and its derivatives without limiting the retail locations the companies operate.

“Most states have very low fees to get a license, but Florida is more unique than any other state because we’re the only one that allows you to have unlimited ability to open as many dispensaries as you want,” Pebbles said.

Peebles also added that most marijuana businesses don’t make as much money as people believe. The IRS prohibits the companies from taking tax deductions except for the cost of goods sold. Peebles, who has represented hundreds of medical marijuana clients in various states, said the companies are “taxing ghost income” at rates of 85% or more.

“So the idea that these companies are making millions and millions of dollars and sitting back and twiddling their thumbs and laughing at everybody is not like that,” she said.

Candidates for the next batch of licensees will be elected by Florida voters in 2018. In 2024, they will approve a constitutional amendment legalizing the recreational use of marijuana. The initiative was launched earlier this month.

“I don’t think the application fee is going to deter people,” Peebles said.

By Dara Cam, Florida News Service