On April 7, 2021, a majority of both houses of the Virginia legislature voted to legalize adult recreational use of cannabis. The approval made Virginia the 16th U.S. state — and the third state this year — to legalize adult recreational use of cannabis. Under the new law, home cultivation and personal possession of cannabis will become legal July 1, 2021, but retail sales will not begin until January 1, 2024.
Virginia Senate Bill 1406/House Bill 2312 legalizes the retail sale of cannabis products to adults over the age of 21 and establishes the Virginia Cannabis Control Authority to oversee the cultivation, manufacture, wholesale, and retail sale of cannabis and cannabis products. The bill also permits private cultivation of up to four cannabis plants for personal use and enables individuals to petition for suspended or modified sentences for past marijuana convictions or for sealing of past marijuana conviction records. Possession of more than a pound of cannabis in a public place, unless permitted by license, remains a felony, while public possession of an amount between an ounce and a pound will be subject to a fine of $25.
Retail cannabis sales will be taxed at 21% statewide, and localities will be able to impose an additional sales tax of up to 3% on top of preexisting state sales tax rates. Proceeds of the cannabis tax will be put towards pre-K programs for at-risk youth, substance abuse programs, and a newly established Cannabis Equity Reinvestment Fund (the “Fund”), among other uses. The Fund shall be used to support persons, families, and communities historically and disproportionately targeted and affected by drug enforcement, through scholarships and vocational resources, grants and business loans supporting workforce development and job training, and contribution to the Virginia Indigent Defense Commission.
Regulatory specifics will be determined by the Board of Directors of the Virginia Cannabis Control Authority, contingent on approval by the Cannabis Oversight Commission. The Virginia Cannabis Control Authority will begin accepting applications for licensure under the statute on July 1, 2023, and retail sales, as noted above, will first be permitted on January 1, 2024. Any city, town, or county within Virginia may, by referendum, prohibit the retail sale of cannabis within its jurisdiction, but no local body may prohibit possession or personal cultivation and use of cannabis.
The legislative process that ended with an affirmative vote for legalization this month began in November 2020 when Governor Northam (D) announced that he would introduce and support legislation aimed at legalizing adult-use cannabis. Not coincidentally, Governor Northam’s announcement came the same day that the Virginia Marijuana Legalization Work Group released a legislative report estimating that Virginia’s potential tax revenues from the commercial sale of cannabis would be between $154 million and $308 million.
Both the Senate and House of Delegates originated bills to legalize recreational cannabis, with House Bill 2312 and Senate Bill 1406 both passing in their originating chambers on February 5, 2021 and receiving approval by the opposite chamber on February 16. Following approval, the two bills headed into concurrence, and a reconciled version of S.B. 1406 was passed by both chambers on February 27, 2021, just before the end of the State Legislature’s 2021 Special Session.
Prior to signing the bill, Governor Ralph Northam added amendments that accelerated the effective date of legalization for home cultivation, and personal possession from January 1, 2024 to July 1, 2021. Governor Northam’s amendments also provided protections for cannabis company employees who wish to unionize and accelerated the timeline for the sealing of records and expungement of cannabis-related criminal offenses. The bill, with Northam’s amendments, went back to both chambers and was approved on April 7, 2021, with Lt. Gov. Justin Fairfax (D) breaking a 20-20 tie along partisan lines in Virginia’s Senate to pass the bill.
Brett M. SchumanPartnerCo-Chair, Intellectual Property
David J. ApfelPartner