Legalize, Tax, and Regulate Marijuana?

Jay Wexler discusses the Massachusetts Marijuana Legalization Initiative—Question 4 on the Massachusetts ballot.

On November 8, voters in Massachusetts will decide on four ballot initiatives. Among them is the Massachusetts Marijuana Legalization Initiative or, Question 4. The question relates to the legalization of marijuana for medical and recreational use. Voters in four other states, California, Nevada, Arizona, and Maine, will weigh in on similar ballot measures. Professor of Law Jay Wexler, who will teach a seminar on the Law & Regulation of Cannabis in Spring 2017, answered our questions about the proposed Massachusetts statute.

Q What does Question 4 on the Massachusetts ballot propose?

A Question 4 is a full statute, entitled “The Regulation and Taxation of Marijuana Act.” The statute includes a lot of details, but most importantly, it would: (1) legalize the possession of small amounts of marijuana and the growing of fewer than six plants for personal use; (2) create an agency known as the Cannabis Control Commission that would promulgate regulations governing the licensing of marijuana establishments; and (3) provide for an additional 3.75 percent sales tax on the sale of marijuana products, with cities and towns having the option of adding up to an additional 2 percent on top of that.

How is marijuana currently regulated in Mass.? How will that change if question 4 passes?

Marijuana possession, manufacture, and distribution has historically been illegal in Massachusetts. In 2008, possession of small amounts of marijuana was decriminalized and is now punishable only by a civil fine. In 2012, Massachusetts legalized the use of marijuana to treat certain medical conditions; patients must obtain a registration card to purchase marijuana for medical purposes. If Question 4 passes, small amounts of marijuana may be purchased and possessed for recreational purposes as well as medical ones, and such possession will not be punishable in any way, including by civil fine.

What measures will be put in place to ensure the age limit is enforced?

The statute very clearly provides that possession of marijuana would be legal only for those 21 years of age and older, and it also makes clear that the knowing transfer of marijuana or marijuana accessories to those under 21 years of age will remain illegal. The statute specifically authorizes the Cannabis Control Commission to adopt regulations “to prevent the sale of marijuana and marijuana products to persons under 21 years of age.”

How does Question 4 compare to other state laws legalizing and regulating the use of marijuana?

If Question 4 passes, Massachusetts would become fairly similar in how it treats marijuana as other states that have legalized recreational use of the drug, namely Colorado, Washington, Oregon, Alaska, and the District of Columbia. The 3.75 percent tax rate specified by Question 4, however, is significantly lower than the tax rate in some of these other states. The District of Columbia is somewhat anomalous, in that while possession of small amounts of marijuana is legal in the District, selling marijuana remains illegal.

How do these laws conflict (or not) with federal law?

This is the real rub. Marijuana possession, manufacture, and distribution remain illegal under federal law. The US Justice Department has issued guidelines that indicate it will focus its enforcement efforts on certain types of marijuana-related conduct that threaten federal values. Although this guidance suggests that the federal government will typically not attempt to enforce federal law against small users and distributors, the guidance is non-binding and subject to change at any moment. Even with the guidance, moreover, the fact that marijuana remains illegal under federal law has enormous impacts on the marijuana industry in states that have legalized it for medical or recreational use. For instance, banks have been largely unwilling to deal with marijuana-related businesses for fear of violating federal laws on money laundering and the like; as a result, the marijuana industry is largely cash-based. Federal tax law also prohibits the deduction of most business-related expenses related to marijuana, thus rendering the effective tax rates of marijuana business far higher than similar businesses in other industries. Federal trademark law and bankruptcy law is also inapplicable to marijuana businesses as a result of continuing federal prohibition.