5 Reasons Minnesota is Perfect for Building a Cannabis Business (Editorial)

Low taxes, no local bans, affordable licensing fees, and no nearby legalized states make Minnesota one of the most attractive markets in the United States.

By Ari Hofnang, Bridge West Consulting

As the 23rd state to legalize marijuana for adults, Minnesota has been a keen observer and learned from the failures of other states’ policies.

A review of the state’s 300-page bill shows that the “nation of 10,000 lakes” is paving the way to becoming one of the most attractive markets in the country for building cannabis businesses.

In Minnesota, annual cannabis sales are projected to exceed $500 million by the 2027 fiscal year. The economic benefits are not limited to “plant-touching” cannabis businesses such as growers, manufacturers and dispensaries. It will also apply to professional service providers such as accounting firms, law firms and engineering firms whose services are needed to support the launch and operation of thousands of new cannabis businesses.

Here are five reasons why Minnesota is one of the top cannabis markets in the United States.

1. Minnesota has a low cannabis excise tax.

Minnesota has set a conservative tax rate for its cannabis excise tax. Minnesota has the fifth-lowest cannabis tax rate in the nation at 16.875 percent, and only four other states (Michigan, Delaware, New Jersey and Maryland) have slightly lower rates.

Higher tax rates can drive up the price of legal cannabis, prompting consumers to seek cheaper alternatives in the illegal market. This unfortunate trend has been observed in states with high taxes, such as California.

Minnesota’s low tax rate ensures that legal cannabis prices are competitive with illegal market prices.

2. Minnesota prohibits local governments from banning cannabis businesses.

Minnesota has wisely weathered its community control issues by prohibiting local governments from outright refusing to establish or operate licensed cannabis businesses within their communities.

Policies that allow local governments to opt out are often politically attractive, but have proven very problematic in some states. For example, in New York state, nearly half of the municipalities have opted out. This has restricted consumer access to legal cannabis and reinforced an illegal market that is unregulated and potentially unsafe.

In a delicate balance between state and local controls in regulating cannabis businesses, Minnesota’s bill would allow local governments to impose reasonable restrictions and participate in the licensing process without opting out outright. are doing.

Specifically, local governments will be able to cap the number of pharmacies based on population, with at least one for every 12,500 people in a given jurisdiction. For example, in the city of Mankato, which has a population of about 45,000, it is permissible to limit the number of clinics to three, but not to ban them entirely.

3. Minnesota license fees are reasonable.

Minnesota law incorporates reasonable fees based on the nature and size of the cannabis business.

Some states have thoughtlessly levied millions of dollars in licensing fees on emerging cannabis businesses without considering the potential negative impact this could have on the market.

Minnesota’s approach promotes a diverse and competitive market by pricing based on the type and size of business, while avoiding exorbitant costs that can deter new business To do.

4. Minnesota offers loans to cannabis entrepreneurs.

Minnesota has wisely allocated funding to programs designed to support social equity entrepreneurs, avoiding the pitfalls of underfunded mandates.

For example, the state has allocated $6 million to the CanStartup initiative, a program that funds nonprofits. These nonprofits provide loans to emerging cannabis businesses and stimulate job creation in communities across the state.

Additional funding will no doubt be needed, but Minnesota has taken an important step in the right direction.

5. Minnesota’s neighbors have not legalized cannabis.

According to the 2020 Census, Minnesota had a population of about 5.7 million. Minnesota borders Wisconsin, Iowa, South Dakota and North Dakota, but none of the states have legalized marijuana for adults. Additionally, an estimated 1.9 million people live within an 80-mile radius outside of Minnesota.

Not only will Minnesotans not have to compete with out-of-state cannabis dispensaries, but out-of-state residents, like those in Fargo, North Dakota (population 124,000), will be able to purchase from out-of-state residents within comfortable distance. means to benefit. ) and Sioux Falls, South Dakota (population 187,000).

For those seeking additional evidence that Minnesota offers great opportunities for cannabis entrepreneurs, the Colorado cannabis market is worth keeping an eye on.

With nearly a decade of experience and $1.8 billion in retail cannabis sales in 2022, at first glance it seems silly to compare Minnesota’s Mew cannabis market to Colorado’s, but once again. think about it

Both states have roughly the same population size. According to the U.S. Census Bureau, Minnesota had a population of 5,706,494 in 2020, slightly less than Colorado’s 5,773,714. Additionally, Statista data showed that the percentage of U.S. adults who used cannabis in the past year (2019-2020) was 23% in Minnesota and 28% in Colorado, but this small difference This is probably due to the large number of retail pharmacies throughout Colorado.

In other words, there is no compelling reason to assume that the state-based cannabis markets in Colorado and Minnesota will not perform similarly over time. In fact, Minnesota enjoys a latecomer advantage in many respects due to its significantly lower tax rate than Colorado and policies that allow regulators to restrict licenses statewide to ensure a balance between supply and demand. It is possible.

It won’t happen overnight, but perhaps by 2033, 10,000 lake lands will surpass centenary states in annual cannabis sales.

Ari Hoffnang is a partner at Bridge West Consulting, an affiliate of Bridge West LLC, one of the first accounting firms in the world focused exclusively on the cannabis industry. Since 2009, the practice has expanded to her over 600 cannabis, hemp and CBD customers nationwide. Ali previously served as Chief Operating Officer of Bireo Health, the parent company of Bireo Health, Minnesota, one of two Minnesota-licensed medical cannabis companies.