With 10 days to go before businesses involved with low-potency hemp-derived products must register with the state, the numbers are trickling upward.
Perhaps a result of a social media campaign noting the requirement contained in House File 100, the number of registered businesses increased from around 500 in mid-August to 1,250 last week, the Minnesota Department of Health said.
And reports from the Department of Revenue show that 842 businesses paid $771,514 in cannabis taxes in August. Since the new law created a 10% tax on sales of cannabis products, those tax collections numbers convert to $7.72 million in sales in August. That might not include all sales, because the number of cannabis taxpayers is increasing with each collections report — from 571 in preliminary July reports to 682 in revised July numbers and 842 last month.
Those 682 businesses collected $699,630 in cannabis taxes in July.
Jason Dayton started Minneapolis Cider Co. with his wife and began offering a line of THC cider beverages shortly after the sale of hemp-derived edibles and drinks were made legal. He said the regulations included in House File 100 haven’t had much impact yet.
“The 10% tax hasn’t been an issue so far, or at least nobody has complained to us about it, and we haven’t seen any slowdown in sales,” Dayton said. “As far as the total number of businesses, that number seems reasonable. We sell across the state and are currently available in over 500 retailers, and we’re certainly not everywhere yet.“
The registration and the tax are responses to the 2022 law that legalized the sale of products made from hemp, a legal variety of cannabis that has less than 0.3% of the intoxicating compound THC. Manufacturers can process that plant to heighten the potency but also can make products that are non-intoxicating but may have health benefits.
The original law lacked much state regulation, no licensing and no taxes outside the sales tax charged on most retail sales in Minnesota. The new law, while focusing largely on the legalization of marijuana for recreational uses, also regulated and taxed the hemp-derived market as well as bringing it under the newly created Office of Cannabis Management. The nine-year-old medical marijuana program will also be under the new office starting in the spring of 2025.
But because there were no licensing or taxation provisions in the 2022 law, there was no way to know with certainty who was selling hemp-derived products, how many businesses were in the fledgling market and how large the industry was in Minnesota. Some cities filled in for the lack of state regulation with their own licensing programs, which will be phased out as the new state-run regulatory scheme kicks in.
That lack of statewide data is slowly changing with initial tax collections that began July 1 and with the registration requirement.
“If your business sells hemp-derived cannabinoid products (edible, beverages or topicals), you must register by October 1st,” read the social media messages sent out by the state Department of Health, which took over oversight of the hemp market for the state Board of Pharmacy. It will turn the regulation over to the Office of Cannabis Management in March 2025.
The state health department is managing the registration as well as the enforcement of laws related to the hemp market. It will be illegal for a business to sell any hemp-derived products after Oct. 1 if they have not submitted the registration form. Registration includes a pledge by the business to follow the new laws and includes details on products sold, hours of operation and the type of business, such as grocery store, smoke shop, beauty salon or dedicated hemp-product store.
It also covers out-of-state businesses that sell online into Minnesota.
The largest percentage of businesses selling hemp products list themselves as liquor stores, followed by “other,” dedicated hemp stores, restaurants and smoke shops. The “other” category includes places like gift shops, bakeries, entertainment venues and online sales.
While population is the primary reason for the numbers of registrations, with locations with Hennepin County leading the way followed by Ramsey, St. Louis County has the third-highest number of registered sellers despite being the sixth most-populous county.