In July of 2019, New Mexico became the 24th state to decriminalize cannabis with House Bill 356. It is important for businesses and marijuana users to know that decriminalization is not the same as legalization.

Prior to this date, possession of cannabis came with criminal penalties such as jail or prison time. Now, those found to possess less than a half of an ounce of marijuana will owe a $50 fine instead. There are also lesser penalties for possessing drug accessories. If you are interested in getting into the hemp, CBD, or cannabis industry, your first step should be to consult with a knowledgeable Albuquerque cannabis lawyer.

In April of 2019, with the signing of House Bill 581, it became legal in New Mexico in July to produce and sell hemp and CBD in the state. With this new statute, food products containing CBD and cannabidiol itself are legal to sell with a permit. Additionally, industrial hemp in New Mexico is now seen as an agricultural commodity instead of a controlled substance. CBD is now found in nearly everything; bath bombs, dog treats, ice cream. Even though CBD is still prohibited by the FDA, it is nearly impossible to enforce its prohibition without the help of state and local law enforcement. 

Each state has its own laws and regulations about what types of cannabis businesses can be opened and ran. In New Mexico, the following types of marijuana businesses are allowed:

• Medical marijuana dispensaries
• Medical marijuana cultivators
• Medical marijuana product manufacturers
• Medical marijuana delivery services
• Medical marijuana testing facilities

If you are interested in pursuing one of these business ventures, your first step should be to consult with an experienced cannabis lawyer in Albuquerque. 

Although New Mexico has legalized medical marijuana dispensaries in the state, there are restrictions as to where potential business owners can place their business. The state gives local municipalities like cities and counties the freedom to restrict or ban where licensed marijuana retailers can operate. For example, there may be restrictions on how close a cannabis business can be to schools or playgrounds. In many areas, they cannot be within 500 or 1000 feet.

Opening a successful and legal marijuana dispensary begins with hiring a knowledgeable Albuquerque cannabis attorney and learning all that you can about this industry and the applicable laws. The next step is to set up a corporate business structure and create a retail business plan, which an attorney can also help you with. You will also need to research potential locations for your business to find out where licensing is legal. 

Next, obtain the necessary licensing to operate your cannabis business and ensure that your operational infrastructure follows all laws and regulations. If you are not growing or producing your products yourself, you will need to contract with cultivators and product manufacturers to supply your business.

Before you begin the process of applying for a cannabis license, you need to establish a business from which to apply. The state will not consider an application from an individual; instead, the applicant must be a business entity in good standing with the state.

Your business will begin when you choose a legal entity and file the appropriate paperwork with the Secretary of State. After that, you will file with the IRS and obtain a taxpayer identification number. You will also need to obtain a certification from the New Mexico Taxation & Revenue Department.

You would start with articles of incorporation and include other key corporate provisions in the bylaws that state how your company will be governed. If your business is a partnership or limited liability company, you will need an operating agreement. Depending on your line of business, you may also need other licenses to operate.

In addition, you will also need other corporate documents that the Department of Health will want to see when they are considering your cannabis application. Of importance here, your application would ask you to provide:

• Your articles of incorporation
• Corporate bylaws
• Certificate of good standing

An attorney can help you both choose the appropriate business entity and draft and file any necessary documentation. When you are seeking to enter the cannabis field, it is important to get your business formation process right to make the best possible impression on the Department of Health. Doing so will allow you to devote as much time as possible to your cannabis-related business arrangements.

As a precursor to even being able to apply for state approval of your cannabis business, you must have a properly formed business entity. As a result, the first documentation you must file is the documentation establishing your business with the New Mexico Secretary of State.

Next, you will need to obtain a tax identification number by registering with the IRS. In addition, you would also need to obtain proof of your good standing with both the New Mexico Secretary of State and the Department of Taxation and Revenue. In addition, the licensing application also asks you to provide your current state business license registration.

Beyond your general business licenses, you would also need specific permission to operate a cannabis business. This involves a very strict registration process where the state will closely scrutinize your application. You can expect the state to review each of the licenses that they request since it wants to be sure that your business complies with laws before they are granted the right to operate in the cannabis industry.

Compliance means making sure that you follow the myriad of laws that apply to New Mexico cannabis businesses. Even though the industry was only legalized in 2007, there are already many laws and regulations that govern state businesses. Further, the regulatory landscape is fast-changing as the state gains more experience overseeing the businesses.

What this means for you is that knowledge is one of the most important things that you can have. Not only do you need an expert in the current laws, but you also need to be able to anticipate future changes in the law. This means that each business needs an expert who understands the laws and can advise them as to the best means of following them.

Also, compliance also means that you have sound policies and procedures in place that govern your business. The Department of Health is already looking at your policies when they evaluate your initial application. However, they reserve the right to audit and inspect your business to verify that you are complying with the law. You should always be ready for an inspection by documenting how you are following the regulations.

The best way to show compliance is by keeping your paperwork organized and conducting your own internal audits. The Department is interested primarily in your safety procedures, so you should be ready to show how you are following your own procedures. Further, you should always reevaluate your own policies to see if there are any weaknesses or changes that can be made to strengthen them.

The major thing that the Department of Health is interested in is the safety of both the product and the operation. As a baseline, the state wants to know who all of the owners are and the people who will be working in the operation.

While there are common documents among all the application classes that the Department is seeking, there are also special requirements for each of the categories.

For example, when the Department is evaluating a manufacturing application, it will pay close attention to measures that your business takes to ensure proper hygiene and testing methods. The Department also will pay attention to the manufacturer’s procurement practice and the security of its inventory.

With regard to laboratory submissions, the focus is partially on the testing processes and equipment that the business will use. The Department wants technical, scientific details of the exact tests and the quality control that the laboratory will use for testing. The emphasis is on ensuring product safety.

For courier businesses, the Department will scrutinize the safety and security of the delivery process, including the vehicles and the delivery routes that are used. The emphasis is on the safety of qualified patients, primary caregivers, and courier staff in light of the product being delivered. In addition, since there is interaction with patients, the Department wants to see how the applicant plans on protecting patient privacy.

In addition, the costs of the application are different for each business category. The application fee starts at $1,500 for a courier business since that is the least capital intensive. The cost tops out at $5,000 for a manufacturing business.

Cannabis legalization often works in a series of steps. This was the case in New Mexico when it went from prohibition to medical legalization and then decriminalization/legalization over the past couple of decades.

Broadly speaking, cannabis policy reform occurs in the following stages:

• Prohibition: Criminal penalties apply for the possession or use of cannabis.
• Decriminalization: Low-level criminal penalties are removed for cannabis usage (e.g., personal possession) and criminal penalties may be replaced with civil fines.
• Medical legalization: Full medical legalization with commercial licensing and testing may come straight away or in a series of stages.
• Legalization: State laws are changed to make any cannabis activity a crime no longer. Cannabis must be removed from the Controlled Substances Act and new rules added for the legal commercial cultivation, distribution, testing, and sales of cannabis.

If you are a registered patient in the New Mexico medical cannabis program, you can apply for a personal production license (PPL).

This permits you to grow a limited number of medical cannabis plants in your place of residence for personal usage: four mature plants in the flowering stage and up to 12 non-flowering seedlings/clones.

To apply for this license, there is a fee of $30, which can be waived if you are on disability, receive social security, or receive a low income.

You will need to provide proof of residence, such as one of the following:

• A recent mortgage statement
• Homeowner’s insurance statement
• Property tax record, or
• County assessor’s record

If you rent, you will need written permission from your landlord.

As the laws change in New Mexico, they need to cater to large-scale cannabis producers, tiny marijuana microbusinesses and specialized growers of medical cannabis.

Established medical marijuana producers were consulted when the regulatory framework for recreational marijuana producers was established.

If you are currently licensed to produce and sell medical cannabis, you can apply for a dual license to produce and sell recreational cannabis too.

Proposed rules also require recreational cannabis retailers to set aside at least 25 percent of their products for medical cannabis patients. This addresses concerns about possible supply shortages for medical cannabis users.

Since the new regulations were passed in New Mexico in June 2021, anyone aged 21 or older in the state can now legally grow six mature plants and six seedlings

However, there is a limit of 12 mature plants per household.

There are 10 different types of cannabis business licenses available in New Mexico, depending on which area or areas of the cannabis industry your business will operate in.

The licenses are issued by the Cannabis Control Division (CCD) and the categories are as follows:

• Cannabis Manufacturer’s License: for manufacturing and packaging of cannabis products (Fee: up to $2500 per year and $1000 per each additional licensed premise).
• Cannabis Producer’s License: for growing cannabis plants, selling cannabis products wholesale and transporting unprocessed cannabis products to other cannabis establishments (Fee: $2500 per year and $1000 for each additional licensed premise).
• Cannabis Courier License: for transporting cannabis to patients, caregivers, and direct consumers (Fee: up to $1500 per year and $1000 for each additional licensed premise).
• Cannabis Retail License: for the sale of cannabis products to qualified patients, caregivers, reciprocal participants, or directly to consumers (Fee: $2500 per year and $1000 for each additional licensed premise).
• Cannabis Consumption Area License: for areas where the consumption of cannabis is allowed (Fee: up to $2500 per year).
• Cannabis Research Laboratory License: for facilities to produce or possess all parts of the cannabis plant and cannabis products to study cannabis cultivation, characteristics, or uses (Fee: up to $2500 per year with $1000 for each additional licensed premise).
• Cannabis Testing Laboratory License: for businesses that collect, sample, and test cannabis products and transport them for testing (Fee: $2500 per year and $1000 for each additional licensed premise).
• Cannabis Producer Microbusiness License: for cannabis producers at licensed locations that possess up to 200 mature cannabis plants at one time (Fee: up to $1000 per year).
• Vertically Integrated Cannabis Business License: for the combination of multiple licenses: cannabis retailer, courier, producer, and manufacturer (Fee: $7500 per year and $1000 for each licensed premise).
• Integrated Cannabis Microbusiness License: for the production, manufacture, sale and transportation of cannabis products — within stated limitations (Fee: $2500 per year with $50 for every additional licensed premise).

A cannabis producer microbusiness license is a license category available in New Mexico for business owners who are interested in setting up a small business as a cannabis cultivator or manufacturer.

Businesses are subject to certain size and operational restrictions, such as operating at a single licensed premises and possessing no more than 200 mature plants at any one time. This is the cheapest cannabis business license available in the state.

There is no limit to the number of licenses that will be issued in New Mexico and, if necessary, a business may apply for more than one type of license.

The integrated cannabis microbusiness license and vertically integrated cannabis business license categories may mean that your business needs to apply for only one license even if you intend to be involved in multiple areas of the industry.

To obtain a license from the Cannabis Control Division (CCD), you will need to submit background information about you and your proposed cannabis business.

This includes a business plan that covers, in particular, security issues, impact on the local environment, compliance with local codes, and identifying/financial information for all persons or entities who will have “control” in the business.

When reviewing your license application, CCD officials will expect to see evidence to support your status as a competent team that can run all aspects of the business.

Stringent background checks will be run to ensure that there have been no criminal convictions for anyone with control in the business and you should be prepared to disclose the following:

• Tax returns for all of the business owners
• Personal and business bios for all owners
• Information on any philanthropic work or donations made
• Info on where you intend to operate your business
• Security information and compatibility of the location with your business plans

To grow, manufacture or sell cannabis in New Mexico, you will need to obtain one of the 10 types of cannabis occupational licenses made available since the legalization of recreational cannabis in the state.

The laws concerning licensing are very long and boring but it’s important to be acquainted with the requirements — our cannabis business lawyers have already done all of the heavy lifting for you there.

Make sure that nothing disqualifies you from starting a cannabis business (e.g., certain convicted felons are excluded) and that all of the people involved in your enterprise will pass muster.

You’ll need to set up a business structure, create a business plan and ensure you have the appropriate funding to get started. Our attorneys can advise and assist you with this.

Also, start researching potential locations for your business and become familiar with the local zoning laws.

Once you’ve completed the research and discussed your license requirements with one of our cannabis business lawyers (ensuring that your operational infrastructure follows all laws and regulations), it’s time to apply for your license to operate your cannabis business.

Cannabis license applications involve time, preparation, and a lot of paperwork and it’s unwise to attempt it alone without first understanding the processes involved and the documentation required.

The Cannabis Control Division creates the rules that license and regulate cannabis businesses in New Mexico. This agency is part of the Regulation and Licensing Department of the state government.

Presently, 10 types of cannabis business licenses are authorized in New Mexico, including couriers, producers (growers), manufacturers, retailers, microbusinesses, cannabis consumption areas, vertically integrated establishments, and integrated microbusinesses.

As is the case in many states that have legalized recreational cannabis in the U.S., the New Mexico state government wants the move to benefit economically-disadvantaged communities, especially rural ones.

The Cannabis Regulation Act recognizes that many of these communities have, in the past, been disproportionately and negatively impacted by the enforcement of cannabis prohibition laws. They may also be impacted by future cannabis production.

So, a series of social provisions have been introduced with the new cannabis business legislation, ensuring the full participation of these communities in the benefits. These include procedures to encourage diversity among applicants, licensees, and staff.

The Cannabis Control Division, which regulates cannabis businesses in the state, will develop a certification for cannabis produced by microbusinesses or licensees that are owned by someone from one of these communities and produce annual reports on diversity within the industry.

Retail sales of cannabis in New Mexico are subject to a cannabis excise tax as follows:

• 12% until July 1, 2025
• An increase of 1% per year
• A maximum of 18% — to be reached on July 1, 2030

The tax does not apply to any sales of cannabis to registered patients, caregivers or visiting patients from other states.

One-third of the cannabis tax revenue goes to the municipality where the sales were made and one-third to the county where the sales were made.

Gross receipts taxes (ranging from 5.125% to 8.8125%, depending on location in the state) also apply to adult-use cannabis but not medical cannabis.

There is no set period for processing cannabis license applications in New Mexico.

From experience, however, you will need around 6 to 12 months of preparation before you can launch your cannabis business, including the time required for processing your cannabis license application.