Governor DeSantis Wants Florida Medical Marijuana Businesses to Pay More.

By Hunter Dublin | August 29, 2022

As Florida medical marijuana businesses continue to make money, Gov. Ron DeSantis stated this week that cannabis businesses should pay more to conduct business in the state.

DeSantis told reporters Tuesday that the state "should charge these people more."

"These are really valuable licenses," the governor explained. "I'd charge them an arm and a leg because everyone wants these licenses."

It was unclear whether DeSantis was talking to medical marijuana businesses already operating in the state or those looking to enter Florida. Insiders say it has the potential to be one of the country's most robust cannabis markets.

While DeSantis intends to collect more money from corporations, one of his first legislative initiatives after taking office in January 2019 was to steer huge bucks their way.

DeSantis pushed lawmakers to lift a ban on smokable marijuana, which the Republican-controlled Legislature enacted after voters approved a constitutional amendment broadly allowing medical marijuana in 2016.

The Legislature immediately granted DeSantis' request, and whole flower products are now the most popular goods sold at the state's more than 460 medical marijuana shops.

DeSantis' remarks this week coincided with the revelation of MedMen Enterprises Inc. that it had concluded a $67 million deal to sell its Florida business to Green Sentry Holdings LLC.

With over 800,000 approved medicinal marijuana users among Florida's more than 22 million citizens, investors eagerly anticipate the opportunity to set roots in the state.

However, the DeSantis administration has been slow to comply with a state statute mandating the Department of Health to virtually increase the number of players in the business, which already has 22 licensed operations.

The governor's office has blamed the delay on litigation over a 2017 law. Still, the statute was upheld by the Florida Supreme Court last year.

The 2017 law established a structure for the medicinal marijuana sector and a timeline for new licenses to be issued as the number of eligible patients grows. To keep up with the patient numbers, state health officials should have issued at least 22 licenses under the statute.

Medical marijuana businesses in Florida were among the first to apply in 2015, with each paying a little more than $60,000 for the chance to sell low-THC cannabis. These applications came after lawmakers approved low-THC drugs for some patients in 2014.

The constitutional amendment of 2016 went much beyond the law of 2014. Since the licenses were first given, nearly all operators who were allowed to add medical marijuana with unlimited THC levels to their product lines have changed hands.

Companies must also spend $60,000 every two years to renew their licenses, which can sell for up to $40 million.

"Why wouldn't we take advantage of the potential to generate revenue for the state based on those?" DeSantis asked Tuesday. "But I believe it would necessitate a statutory change (by the Legislature), and I don't believe that could be accomplished only through administrative regulation."

The governor was referring to a provision in the 2017 bill that limits the amount the Department of Health can charge businesses for permits and renewals. According to the statute, the state is only allowed to levy fees to pay the costs of operating the medical marijuana program, as well as a research program and a public-health campaign.

The statute also provided health officials the authority to levy "supplemental licensure fees" to defray program costs. However, the health department has never authorized such payments.

Raising application and renewal fees "would be bad," said Brady Cobb, the founder, and CEO of Green Sentry, over the phone this week.

"If it happens, it happens," Cobb said, adding that the state might earn more money by taxing marijuana products or enabling operators to wholesale products to one another and taxing the sales.

Under a recent round of applications for a license designated in the 2017 law for a Black farmer, the state demanded a higher fee. According to Department of Health standards, candidates had to pay a $146,000 fee to compete for the Black-farmer license —- more than twice the amount from the 2015 application process.

During five days in March, the agency approved a dozen applications for the Black-farmer license but did not name the winner.

After the Black-farmer license is approved, the agency is anticipated to open a fresh round of licensing applications. However, the state has not specified a date. At least 150 applicants are expected, and possibly twice that number.

Although DeSantis claims the state does not charge enough for licenses, Florida's licensure and renewal rates already outstrip those of most other states.

Thus according to Sally Kent Peebles, a Jacksonville-based partner at the national cannabis-law firm Vicente Sederberg LLP, this is due to how the state's medical marijuana sector is established.

Peebles told The News Service of Florida last week that Florida licenses are "the most valuable licenses in the world."

Their value is predicated, in part, on the state's licensing structure, which requires operators to cultivate, process, and sell marijuana and derivative goods while not restricting the number of retail locations the companies can operate.

"Most states have considerably lower license prices, but Florida is much more unique than any other state because we're the only state where one license allows you to operate as many facility locations as you want," Peebles explained.

According to Peebles, most marijuana firms do not make as much money as people believe. Except for those linked to the costs of goods sold, the IRS bans corporations from tax deductions. That means the companies are "being taxed on ghost money" at rates of up to 85%, according to Peebles, representing hundreds of medicinal marijuana clients across the country.

"So the idea that these businesses are generating millions and millions of dollars and sitting back and twiddling their thumbs and laughing at everyone while raking in the wealth is just not the case," she explained.

Potential applicants for the next round of licenses are hoping that Florida voters will pass a proposed constitutional amendment legalizing recreational marijuana usage in 2024. The initiative began earlier this month.

"I don't think the application cost will put people off," Peebles stated.