New Mexico Marijuana Business

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What is the Demand for Marijuana in New Mexico?

According to a 2016 study conducted by Kelly O'Donnell of the O'Donnell Economics and Strategy, the medical cannabis market in New Mexico is growing at a rapid rate and shows no sign of slowing down. Kelly O'Donnell is a research professor at the University of New Mexico and an economist and public finance expert specializing in the critical intersection between economic development and social policy. According to the report, demand for medical marijuana exceeds supply, causing some dispensaries to operate on limited schedules or close without notice when they run out of products to sell.

Per the O'Donnell report, patient enrollment in the New Mexico Medical Cannabis Program (MCP) increased 81% between June 2015 and June 2016. Despite increased staffing in the MCP, the state failed to process more than 30% of the medical cannabis applications within the requisite 30 days due to an exceptionally high volume of applications. As of July 2021, the New Mexico Medical Marijuana Program recorded having 120,957 active patients. Demand for medical cannabis in New Mexico takes three main forms: medical marijuana eligible residents who are yet to be enrolled, current medical marijuana cardholders who are not able to obtain enough cannabis from legal sources, and current and potential cardholders who would purchase more edibles, concentrates, and infused products if they were more readily available. As of July 2016, New Mexico's demand for medical cannabis exceeded supply by 2.1 million grams or 4,552 pounds.

According to another O'Donnell report submitted to the New Mexico legislature in 2019, the state's Medical Cannabis Program grew 47% between November 2017 and November 2018. The report estimated more than $400 million or 47 metric tons of adult-use cannabis to be sold after the first full year of implementation of recreational cannabis, and $660 million in the fifth year.

The 2019 report also indicated an increasing volume of cannabis use among New Mexican adults. Using data obtained from the National Survey on Drug Use and Health (NSDUH), the report estimated that between 2014 and 2017, the number of New Mexican adults who reported using cannabis in the past month increased by 20%.

According to a cannabis report prepared for the New Mexico Department of Health in 2021, the state needs a total annual cannabis plant count of between 238,000 and 308,000 plants per year. To meet the demand for medical and adult-use cannabis, the following recommendations were suggested:

• Between 2,007 and 3,756 plants per harvest cycle (PPHC) per producer are estimated to meet New Mexico cannabis demand for both medical and adult-use cannabis during Year 1 of adult-use enactment.
• Between 1,533 and 2,231 PPHC per producer is recommended to meet adult-use cannabis demand.
• Between 474 and 1,525 PPHC per producer is recommended to meet medical cannabis demand.

How is Marijuana Taxed in New Mexico?

Following the signing of HB 2 into law in April 2021, taxes were eliminated on the sales of medical marijuana in New Mexico. Hence, sales of medical marijuana products in the state are now tax-free. For recreational marijuana, the state plans to levy an initial excise tax of 12% on all marijuana sales, with plans to increase the tax to 18%.

Per HB 2, starting from 2025, the excise tax rate would climb by 1% each year until it reaches 18% in 2030. Cannabis retailers are required to pay this tax for each cannabis product they sell. This is on top of local gross receipts tax businesses have to pay (this ranges from 5.125 to 8.6875%), meaning that the total tax cannabis retailers will have to pay, may go up to 20%. For instance, in Santa Fe, the gross receipts tax is 8.4375%; in addition to the 12% excise tax, the total tax paid on each marijuana sale by cannabis retailers in the city is 20.4375%. Retail sales and tax collection are expected to begin in 2022.

What is the New Mexico Cannabis Control Division?

The Cannabis Control Division (CCD) was created under the New Mexico Regulation and Licensing Department following the signing of the Cannabis Regulation Act into law by Governor Michelle Lujan Grisham. This Division has a mandate to process license applications for producers, with standards and documentation procedures in place. It will administer the Cannabis Regulation Act and the licensing and regulatory provisions of the Medical Cannabis Program that was established by the Lynn and Erin Compassionate Use Act (LECUA). However, the Medical Cannabis Program patient registry will continue to be maintained by the Department of Health.

The CCD is expected to create a Cannabis Regulatory Advisory Committee and begin processing license applications for cannabis producers, cannabis producer microbusinesses, and properly licensed medical cannabis producers no later than September 1, 2021. The Advisory Committee is tasked with advising the CCD on the development of rules covering best practices, protection of public health and safety, and the promotion of economic and cultural diversity in licensing and employment opportunities.

By January 2022, the CCD is expected to begin licensing cannabis training and education programs. In the same period, CCD will begin issuing cannabis server permits and processing license applications for all license types. It is expected that the retail sale of commercial cannabis will begin no later than April 1, 2022.

In considering proposed rules regarding the processing, approval, and denial of license applications for cannabis licenses in New Mexico pursuant to LECUA, the CCD organizes rule-making hearings. Rule-hearings also consider the regulation of licenses specified under the Cannabis Regulation Act. Licensing considerations include proposed fees for corresponding license types and plant count limits. Technical information used to inform the proposed rules are typically made available to the public before the set date for rule-hearings. Through rule-hearings, the CCD accepts public comments on the proposed rules for processing, approval, and denial of license applications. Written comments on proposed rules may be submitted to Robert Sachs, Deputy Director of Policy for the CCD, via email at ccd.publiccomment@state.nm.us. Written comments may also be submitted by mail to:

Cannabis Control Division

Public Comment

c/o Robert Sachs

P.O. Box 25101

Santa Fe, NM 87504

Rule-hearings may be held both virtually and physically. Persons who have submitted their comments are also usually allowed to present their comments at the rule-hearing. Comments received before the date of the rule-hearing are posted on the CCD website.

For more information on the actions and activities of the New Mexico CDD, you may sign up for updates on the CCD website. You can also contact the Division at:

Cannabis Control Division

New Mexico Regulation & Licensing Department

2550 Cerrillos Road

Santa Fe, NM 87505

Phone: (505) 476-4995

Mail: RLD.CannabisControl@state.nm.us