Cannabis Business in Maine

In 2023, Maine's cannabis industry made significant financial contributions to the state’s economy. According to Maine Revenue Services, the industry generated close to $21 million in sales tax revenue and nearly $15 million in excise tax. The Maine Office of Cannabis Policy reported approximately $217 million in retail sales and issued around 109,000 medical patient certificates during the same year.

The Two Types of Cannabis Businesses in Maine

• Cannabis-Touching Businesses: These businesses directly handle the cultivation, processing, distribution, or sale of cannabis products. They operate under specific regulations and legal requirements unique to their involvement with the plant.
• Cannabis-Adjacent Businesses: These support businesses provide services or products related to the cannabis industry without directly handling the cannabis plant. They follow different regulatory and legal standards.

Understanding the type of cannabis business is essential, as each category comes with its own set of compliance challenges and regulatory measures that need to be addressed.

Understanding Cannabis-Touching Businesses

Cannabis-touching businesses are directly involved in the cultivation, processing, distribution, or sale of cannabis products, maintaining a close connection to the cannabis they manage.

In Maine, these businesses often oversee multiple stages of the supply chain, from cultivation to final sales, allowing for a streamlined approach to managing cannabis products throughout the entire process.

Here are some examples of cannabis-touching businesses and their roles in Maine:

• Cultivators: These businesses are responsible for growing cannabis plants, whether indoors or outdoors. Cultivators often specialize in different strains and may participate in breeding programs to develop new cannabis varieties. They must comply with state regulations to ensure that their cultivation practices meet required quality standards and legal requirements.
• Processors: Processors take raw cannabis and transform it into various products, such as oils, edibles, concentrates, and topicals. This process involves extraction, refinement, and sometimes the development of entirely new cannabis products. Processors must follow strict state regulations to ensure their products are safe and consistent for consumers.
• Testing Laboratories: Testing labs play a crucial role in ensuring that cannabis products are free from contaminants like mold and pesticides. These labs perform comprehensive tests to verify the purity and potency of cannabis before it reaches dispensaries.
• Dispensaries and Retail Stores: These are the locations where consumers purchase cannabis products directly. Dispensaries and retail stores must adhere to state regulations, including age verification of customers and compliance with purchase limits. They also ensure that they follow state tracking and reporting systems.
• Distributors and Supply Chain Management: Distributors are responsible for transporting cannabis products from producers to retailers. This includes overseeing the supply chain, ensuring secure transportation, and maintaining compliance with state tracking systems to guarantee transparency and accountability throughout the distribution process.

Understanding Non-Plant Touching Cannabis Businesses

Non-plant touching cannabis businesses, also referred to as ancillary or cannabis-adjacent businesses, play a crucial role in supporting the cannabis industry without directly handling the plant. These businesses ensure the smooth operation and infrastructure of the industry. Below are some examples:

• Risk Management and Insurance Solutions: Protecting cannabis businesses, their employees, and products is essential. Insurance providers with expertise in the cannabis industry offer tailored coverage for various aspects of operations, from production to liability.
• Strategic Consulting and Business Management: Firms specializing in cannabis provide guidance on licensing, compliance, market strategy, and operational efficiency. They help businesses navigate the complexities of the regulated market while optimizing their operations.
• Financial Services and Payment Processing: Due to federal restrictions, traditional banking options are limited for cannabis businesses. Specialized financial services, including loans and payment processing solutions, are vital for maintaining smooth operations and regulatory compliance.
• Technology and Compliance Software: Technology is indispensable for modern cannabis operations. Tools like seed-to-sale tracking systems, Point-of-Sale (POS) systems, eCommerce platforms, and security solutions help ensure operational efficiency and regulatory compliance.
• Legal Guidance and Compliance Support: Cannabis businesses must adhere to complex state and federal regulations. Legal firms specializing in cannabis law provide the necessary support to navigate these regulations and prevent legal complications.
• Financial Management and Accounting: The cannabis industry faces unique financial challenges, particularly under Section 280E of the IRS Code, which limits tax deductions. Specialized accounting services are crucial for managing these challenges and ensuring accurate financial tracking.
• Branding and Marketing Services: Given the strict regulations around cannabis advertising, businesses need specialized branding and marketing strategies. These services ensure that products are promoted effectively within the legal framework.
• Packaging and Product Labeling: Compliance with packaging regulations is critical in the cannabis industry. Companies specializing in this area ensure that products meet state requirements for child-resistant, opaque, and clearly labeled packaging.
• Market Research and Data Analytics: Data-driven insights are key to optimizing operations in the cannabis industry. Analyzing consumer behavior, supply chains, and product quality helps businesses make informed decisions and stay competitive.
• Advocacy and Industry Representation: These organizations play a pivotal role in representing the cannabis industry at the state level. They work to influence policy, advocate for regulatory changes, and provide insights that support the growth and sustainability of the industry.

Distinctions Between Plant-Touching and Non-Plant Touching Businesses

The differences between plant-touching and non-plant touching cannabis businesses influence various aspects of their operations, particularly in areas like regulatory requirements, financial management, and compliance. Here are the key distinctions:

Banking:

• Cannabis-Touching Businesses: These businesses face significant banking restrictions due to federal regulations, often requiring them to operate in cash and rely on a limited number of banks willing to take on the legal risks. This results in complex financial management and increased compliance burdens.
• Cannabis-Adjacent Businesses: These businesses typically have broader access to traditional banking services, such as loans, credit lines, and bank accounts. This access simplifies their financial operations and supports growth.

State Laws:

• Cannabis-Touching Businesses: In Maine, these businesses must obtain specific state licenses and comply with strict regulations, including security measures and product testing. Federal laws also impose significant banking restrictions.
• Cannabis-Adjacent Businesses: These businesses generally need only standard business licenses and encounter fewer regulatory challenges. They also benefit from better access to financial services.

Accounting:

• Cannabis-Touching Businesses: These businesses are subject to Section 280E of the IRS Code, which limits their ability to deduct typical business expenses, resulting in higher taxes. They also face intricate inventory management requirements and strict compliance obligations.
• Cannabis-Adjacent Businesses: These businesses can take standard tax deductions and employ more straightforward accounting practices. They avoid the stringent compliance required for cannabis inventory tracking, making their financial operations less complicated.