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HD 4190

An Act establishing a local value added tax on cannabis cultivation sales

194th Legislature (2025-2026) Introduced by Mike Soter

Creates a 1% local value added tax on completed cannabis goods sold from cultivators to retailers, with revenue distributed to municipalities by the DOR.

Senate concurred
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Bill Summary · HD 4190

Summary: Bill HD 4190 – An Act establishing a local value added tax on cannabis cultivation sales

Overview

HD 4190 proposes to (1) prohibit municipalities from requiring host community agreements (HCAs) for cannabis cultivation establishments, and (2) create a new local value added tax (VAT) of 1% on the sale of completed cannabis goods from cultivators to licensed retailers, to be collected by cultivators and remitted to the Department of Revenue (DOR) for distribution to municipalities. The VAT applies to adult-use cannabis products; medical cannabis products would be exempt. Regulations on collection and distribution would be issued by DOR within 90 days of the act’s effective date.

Key Provisions

Section 1 – Host community agreements

  • Amends Chapter 94G, Section 3(d): No municipality may require an HCA as a condition for licensing, operation, or approval of any cannabis cultivation establishment.
  • Cultivation facilities remain subject to applicable state laws and regulations; municipalities cannot impose HCAs beyond state requirements.

Section 2 – Local Value Added Tax on Cannabis Cultivation Sales

  • Amends Chapter 64H by adding Section 6B: Local VAT of 1% on the sale of completed cannabis goods by licensed cultivation facilities to licensed cannabis retailers, within any Massachusetts municipality.
  • Tax basis: value added to the goods during the cultivation process (i.e., the tax targets the cultivation-derived value rather than gross price alone).
  • Collection and distribution: The cultivator collects the 1% VAT at the point of sale or transfer of completed goods and remits it to the DOR, which distributes funds to the appropriate municipality.
  • Scope: The 1% VAT is in addition to any local sales tax. Exemption: medical marijuana products are exempt; adult-use products are taxed.

Section 3 – Regulatory authority

  • The DOR must promulgate regulations regarding VAT collection and distribution within 90 days after the act’s effective date.

Fiscal/Administrative Implications

  • Revenue flow: New local VAT revenue generated by cannabis cultivation sales, distributed to municipalities via DOR.
  • Tax base and compliance: Applies to adult-use cannabis products; cultivation facilities handle collection and remittance.
  • Administrative burden: Requires DOR regulations and ongoing compliance by cultivators; potential administrative costs for municipalities to administer funds.

Who Is Affected

  • Cannabis cultivators: Responsible for collecting/remitting the 1% VAT.
  • Licensed cannabis retailers: Purchasers of completed cannabis goods from cultivators; indirectly affected through price/cost shifts.
  • Municipalities: Receive VAT proceeds through DOR distribution; no HCAs required for cultivation operations.
  • Department of Revenue: Administers collection, distribution, and regulatory framework for the VAT.
  • Consumers: Indirect effects through changes in pricing of adult-use products (though the tax is at the cultivation stage, not at purchase by consumers).

Timeline and Status

  • Introduced: February 27, 2025
  • Referred to: Cannabis Policy (2025-02-27)
  • Status: Senate concurred
  • Next steps: If not already enacted, the act would require final passage and potential signing into law; regulatory framework to be issued within 90 days of effective date.

Notes

  • The bill emphasizes local revenue generation from cultivation activities while limiting municipal leverage over cultivation licensing via HCAs.
  • Medical products are exempt from the VAT, aligning with existing medical-use tax treatment.

Compiled from official sources — confirm details with the bill’s official record.

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