Here’s Why This Jar of Weed Costs $60 at a Legal N.Y.C. Dispensary

Aug. 20, 2024

Legalizing marijuana in New York brought seismic changes. It also brought sticker shock. This 3.5-gram jar of flower costs $60 at a licensed Queens dispensary, compared with about $40 to $50 from dealers and unlicensed shops.

Grown and packaged at a Central New York farm, the flower is a popular strain called 91 Octane. Jeremy Rivera, a co-owner of the dispensary, Terp Bros, said he bought 64 jars in July for $1,700 and sells one daily.

Packed in the stockroom are 638 products in $20,000 worth of blue and clear plastic bins on wire shelves. The room was reinforced with steel mesh ($3,700) behind the drywall, cheaper to buy from Illinois than locally.

Mr. Rivera and his business partner, Alessandro Cottone, spent $53,500 last year on a deposit and broker fees on a storefront on Ditmars Boulevard. The landlord wanted $8,500 monthly. They offered $9,000 and got three months free.

To meet strict state security requirements, they spent $67,700 for a system that includes cameras covering every inch of the store and that backs up footage for 60 days. “No blind spots,” Mr. Rivera said.

Eight of the store’s 16 workers are “budtenders” who help customers make selections and handle transactions. They’re paid $18 to $22 hourly, and receive benefits and protections like paid family leave and insurance coverage for job-related injuries and illnesses.

Cannabis remains illegal under federal law, so state-licensed sellers pay income taxes but can’t take most deductions. For 2024, Terp Bros expects to pay the Internal Revenue Service about $280,000 more than if it were a restaurant, its accountant said.

Here’s Why This Jar of Weed Costs $60 at a Legal N.Y.C. Dispensary

It costs to play by the rules.

That’s why 52 percent of Terp Bros’s income after the costs of products goes to federal, state and local income taxes. Were the dispensary a traditional business, it would pay about 36 percent, according to the accountant, Justin Ash of Accounting Buds.

Customers also pay a higher sales tax on cannabis (13 percent, or an extra $7.80 on those jars of 91 Octane) than on alcohol (8.875 percent).

And legal stores have faced competition from the unregulated market, which exploded after recreational cannabis was legalized in 2021. A slow licensing process, tight rules and a lack of state-promised financial support for legal sellers initially helped illicit retailers gain an advantage. In recent months the authorities have cracked down on illegal shops, even as thousands remain in business.

Still, sales have risen at licensed dispensaries, and regulators have proposed easing bans on discounts and loyalty programs to help attract customers. The state also expanded licensing beyond the initial pool of people with cannabis convictions and business experience.

To stay afloat, Mr. Rivera, 37, said, “you have to be very lean.”

Terp Bros sells every product — from drinks to edibles to smokable flower, all of which must be prepackaged — for about twice the wholesale price, a common industry markup to defray the costs of a legal business. Prices vary based on quality, availability, demand and seller discretion.

Before tax, legal dispensary customers pay an average of $7.62 more for those jars of 91 Octane than for what’s available on the unregulated market, said James Cosgrave, an owner of Rolling Green Cannabis, the farm that sells them to Terp Bros. Each jar costs almost $30 wholesale, plus a 9 percent tax. The farm pays for glass jars (which must be childproof), lab testing and tracking software.

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